TD Takes Heat for its Collateral Mortgages

Thank you Canadian Mortgage Trends for this great article!

I'm hoping more and more people start to realize how important it is to speak to a professional who is NOT tied to one lending institution. This is not just with a mortgage, it's with investments, insurance and so forth.

There's a reason why we're here...to help educate you and to help you make the right decisions...with only you and your goals in mind. No one elses, ie shareholders, big CEO's etc...

Collateral charge mortgages got more bad press on Friday after CBC’s Marketplace ran this report.
The gist of it is that collateral mortgages "effectively trap you at the bank," says the CBC (which is not entirely true…more on that below).
TD Canada Trust, which sells only collateral charge mortgages, was caught in CBC’s crosshairs. An undercover reporter went into a TD branch with a hidden camera, asking the mortgage rep what made TD mortgages different than those at other banks.
After being questioned in four different ways, the TD rep finally disclosed that TD’s mortgage was a collateral charge, saying:

"This could be considered a con for clients who want flexibility to have the choice of transferring out (to another lender).”

CBC approached TD corporate for comment, but TD apparently wouldn’t respond about its collateral mortgages on camera.
Collateral charges are designed so that you don’t need to pay refinance fees if you add more money to your mortgage. But they’re also criticized because, in most cases, they force you to pay legal/registration fees to switch to another lender (due to the way they’re registered). In turn, that roadblock helps the lender retain more customers.
Even TD itself does not accept collateral mortgages from other lenders. In its mortgage guidelines (which we obtained freely off the Internet) TD says: “Collateral mortgages (e.g. Manulife One accounts and Scotia Total Equity Plan accounts) are secured by collateral mortgages and cannot be transferred [to TD].”
It should be noted, however, that a handful of lenders currently pay legal fees to attract business from people with collateral mortgages. ICICI Bank (for status brokers) and Royal Bank (according to a rep we spoke with) are two such lenders.
One of the bones CBC picked with TD was that its collateral registration is not disclosed to clients until the customer is signing in the lawyer’s office, at which point it's too late to switch lenders. CBC might have been referring to old documentation, however, because TD’s approvals now clearly disclose that their mortgages are a “COLLATERAL CHARGE.” (Whether the borrower reads this disclosure and understands it, and whether the TD rep or broker explains what it means, are separate issues.)
Collateral mortgages are useful and can save you roughly $500 to $800 in legal costs if you:

a) have a high likelihood of refinancing before maturity, and
b) the lender approves you for those additional funds (a big caveat).

But they also have potential drawbacks, over and above the additional switching cost:

• Since they’re often registered for more than the mortgage amount, collateral charges can sometimes prevent you from obtaining a second mortgage or a secured line of credit elsewhere (unless you pay any penalties and fees required to leave the collateral mortgage lender, or unless that first lender reduces the mortgage amount it has registered and permits secondary financing).
• Title insurance premiums can sometimes be higher for a collateral mortgage than for a regular mortgage.
• In some cases, defaulting on another debt owed to a collateral mortgage lender can put your house at risk. That’s because that lender can theoretically seize your home equity if you don’t pay that other debt. (This is called “offsetting” in legal parlance.)

A number of other lenders sell collateral charge mortgages besides TD. They do so even if the borrower wants just a regular mortgage with no line of credit. Such lenders include ING Direct, National Bank and various credit unions, for example. And most of these lenders don’t give you an option to refuse this type of registration.
All in all, collateral mortgages are right for some but clearly unsuitable for many. A few years ago, TD said that “20 times” as many customers refinanced with them versus leaving for another lender. But that figure has to be less now, given that government rules prohibit refinances above 80% loan-to-value, and given that home price appreciation isn't what it used to be.
To that extent, the net benefit of collateral mortgages is questionable for most of today's borrowers.

Source: http://www.canadianmortgagetrends.com

Painful Breakage Costs

Great article from Canadian Mortgage Trends. The big 6 have been proven to be very expensive to get out of their mortgage.

Personal Finance Columnist Rob Carrick deserves a tip of the hat for bringing TD’s inordinate mortgage breakage fees to light. More here. Yet, while Carrick's article focuses on TD's excessive fees, TD is far from the only lender that exacts extra pounds of flesh for breaking a mortgage contract.
Others lenders do things like:

• Charge 3-month interest penalties based on posted rates instead of your actual rate like most lenders (See: 3-Month Penalties Aren’t Always Clearcut)
• Charge $300-$1,000 “reinvestment fees” on top of your penalty and discharge fees
• Charge interest rate differential based on posted rates (common among the Big 6 banks) instead of cheaper discount rates 
• Impose IRD charges based on bond yields (which can sometimes be more expensive than even posted rate penalties)
• Apply IRD penalties to variable-rate mortgages
• Charge 6-12 month interest penalties, instead of three months
• Prevent early termination altogether.

Before choosing your next mortgage, ask your lender or broker for a written list of early termination charges, as well as the lender’s penalty formula.
The fairest lenders impose only a discounted penalty and a simple discharge fee. If you’re going to deal with a lender that charges you through the nose to break early, you better be confident that you won’t need to. And, your interest rate better be well below all other comparable lenders. (This assumes you’re well qualified because your options may be limited if you’re not.)
When accepting harsher termination charges in exchange for a low rate, remember that it’s not always possible to know where life will lead you 3-4 years down the road (that’s when most folks break a 5-year mortgage).
People terminate their mortgage before maturity for numerous reasons, including:

• equity take outs (People use these for debt consolidation, buying other properties, investing, educational borrowing, renovations, business start-up, etc. Many lenders let you tack on extra money to your mortgage without a penalty. Some don't. Others charge no penalty but bend you over on the interest rate.)
• job change
• new marriage (e.g., consolidating residences)
• separation/divorce
• upsizing or downsizing (if a port isn’t advisable)
• rate improvement
• amortization extension
• adding a readvanceable line of credit
• health issues
• unemployment
• relocation.

Source http://www.canadianmortgagetrends.com

Stain removal

Household cleaning tasks:

To clean deodorant stains on clothes: Mix a past of baking soda and a small amount of water, then work it into the stain and allow it to sit for a few hours. Brush away and repeat as necessary. Alternatively, try lemon juice with a liberal sprinkling of salt. Scrub with an old toothbrush, and let dry in direct sunlight.

To clean burnt pots and pans: Mix baking soda with water, bring to a boil, let cool, then scrub with a non-abrasive scouring pad. White vinegar is also an option (instead of baking soda) but this can create a rather strong odour. Tough stains may call for a detergent paste or even oven cleaner, but try milder solutions first.

To get gum out of carpeting: Apply an ice cube wrapped in a thin towel or plastic bag to freeze the gum, and then chip it away with a spoon or dull knife. The smaller bits can be loosened with a degreasing product, cooking oil or even peanut butter, but these could stain your carpet, so always test first.

Note: Always test any cleaning solution on an inconspicuous area or surface before using.

Why it's SO important to talk to a Mortgage Professional

In the last couple weeks I have begun to feel really bad for a couple of my trusted realtor partners.

They have had clients whom have gone to their bank for financing and have been given the green light to go out shopping. Well, in these few cases all of them were unable to purchase.

This being the best and worst case. Clients go into the branch, (I wont mention the actual bank as I've heard it happening at others) sits down with the supposed 'mortgage specialist' and the person behind the desk says this... From looking at what you've told me for income etc. I believe you can purchase for the $300k you are looking for. Clients say great, can we have a pre-approval to be certain. We don't do pre-approvals, we tell you yes and go write an offer and then we'll get everything going, is what they were told.

Well they went out shopping and wrote an offer. The realtor finally convinced them to talk to me, which was a good thing. First off, what they were being offered in terms of product and price, was way offside of current market conditions. Secondly, if this person at the branch would've done his homework up front, i.e pull credit and check income, he would've found out that there was a concern with credit and they were NOT financeable. So ALL that work, writing offers, seeing homes, was for not. Again, he didn't even pull their credit, nothing!

I see this happening more and more these days. As banks ramp up their 'mortgage specialists' to try and get rid of us, Mortgage Professionals. They're hiring people that really don't have a true clue. Of course by all means, this is not everyone. Just seems to be the norm. There are some really good bank reps and I have relationships with them. And don't get me wrong, there are some misguided brokers out there too!

Remember, we as Mortgage Professionals have to go to school and educate ourselves all year round to stay on top of the industry. Well, most of us do anyway! More often than not, the person at the bank has done his duty and gets pulled to a different position within 6 months, and to be a 'mortgage specialist' they do NOT need any real education etc. How can you really trust anyone that has no education, real guidance, or only has the small couple products to sell to you, with your biggest financial purchase? In my opinion it's very hard!

I hope more and more people will start getting the word out and help the general public understand that we are professionals and do this day in and day out. I've been here for 8 years and have no reason to go elsewhere! It's my passion and I LOVE helping people!



Side notes: Remember that bank employees are generally paid a base salary and a commission on how high of a rate they charge you. This is why in the example above their offer was a lot higher. Once the bank knows a broker is involved they all of a sudden come down. Well, why wouldn't they offer you this to begin with???

If it wasn't for us we'd all be paying posted rates or rates much higher than they are today. We are competition and have access to lenders that ONLY do mortgages. So they are able to provide MUCH better products and services.

There's my rant for the day! Something that's been on my chest for a couple days.

Vancouver Daily Province - February 23, 1920

This past weekend I was cleaning out an old barn on a property I have. In the barn I came across a Vancouver Daily Province newspaper dating back to 1920.

The article that stood out was the one I'm showing here. This was a marketing technique used by someone in real estate. It's very interesting and made me smile!

In case you can't see the wording in the picture, here's what it says.

You have property to sell. You know that somewhere in the city is a man to whom that property would appeal strongly. Perhaps there are many such men - but in the group of 'possible buyer's for your property there is ONE MAN to whom it would be especially valuable. To this man it would represent the successful end of his search. It is what he wants, what he needs, what he is going to keep on looking for until he finds it.

If you knew who this man is you could make a prompt sale of your property. But you don't know him. You have no clue. So far as you are concerned he is lost in the crowd. There is one chance in a million that he may happen to find out about your property through somebody else. It is too long a chance. YOU MUST FIND HIM.

He reads the real estate advertisements - of that you may be sure. He may have read an advertisement of YOUR PROPERTY - but failed to have identified it as WHAT HE IS LOOKING FOR through your own failure to describe it adequately.

You can find him by making it easy for him to find you. It will not be easy for him to find you unless you tell him all about your property - answer, in your advertisement, all of his probably questions about it. If you do that, in your advertisement, you will find yourself in DIRECT COMMUNICATION WITH HIM.

BC First time, new home buyers bonus

BC First-Time New Home Buyers' Bonus - a one-time payment worth up to $10,000 for BC residents who are first-time home buyers and who purchase an eligible new home.
BC Resident - if you file a 2011 BC resident personal income tax return, or if you move to BC after Dec. 31, 2011, or you file a 2012 BC resident personal income tax return (you will not be eligible for the bonus if you move to BC after Dec. 31, 2012)
First-time home buyer - an individual who has never previously owned a primary residence anywhere in the world. If multiple buyers, each must be a first-time home buyer (unlike PTT).
Primary residence - generally a house that you own, jointly or otherwise, that you intend to live in on a permanent basis.
An eligible new home includes new homes (i.e. newly constructed and substantially renovated homes) that are purchased from a builder and that are owner-built.
Other conditions:

• Contract of purchase and sale is entered into on or after February 21, 2012;
• HST is payable on the home;
• no one else has claimed a bonus in respect of the home;
• construction of the home is complete, or the home is occupied, before April 1, 2013

How much is the Bonus - equal to 5% of the purchase price of the home (or in the case of owner-built homes, 5% of the land and construction costs subject to HST) to a maximum of $10,000.
Bonus will be reduced if income is too high:

• for individuals, bonus reduced by $.20 for every $ in net income over $150,000 (bonus is reduced to zero at $200,000 net income),
• for couples, bonus reduced by $.10 for every $ in family net income over $150,000 (bonus is reduced to zero at $250,000 family net income).

The builder sent in my BC HST New Housing Rebate. Am I still entitled to the bonus? Yes, so long as you meet all the other eligibility requirements.
Is the bonus taxable? No. The bonus is a refundable personal income tax credit, meaning it will not be added to your income on your tax return.

Information from http://www.bcrealestatelawyers.com

Bank of Canada holds steady, again

The Bank of Canada is keeping its trendsetting policy interest rate at one per cent for a while longer, and likely a whole lot longer.

The central bank said the Canadian economy continues to expand, but that housing activity is starting to decline and exports remain weak.

Still, the bank said growth will average 2.2 per cent this year, one-tenth more than it had projected in July.

Analysts had been expecting bank governor Mark Carney to soften his hawkish tone about future interest rate hikes and he obliged, saying modest withdrawal of stimulus will be required over time.

That suggests the time may be a long way off.

The bank also notes it will consider the health of the household sector in setting monetary policy, something it hasn't done in previous interest rates announcements.

Source: The Canadian Press