Last night I received yet another call from my local CIBC branch trying to push credit on me.
It is the 4th time the same person has contacted me and the fourth time I have told him to leave me alone. I will not obtain any more unsecured credit nor do I want anything from you.
Here's kind of how the conversation went:
I'm calling today as you've been a loyal client of ours for 13 years and people with good credit like yourself, we are offering you a line of credit and a different option on you Visa.
Sorry sir, I do not need or want anything from you. I've been a Visa holder for 13 years and I do not want to deal with CIBC.
Well we could look at getting your mortgage switched over or investments.
No sir, I'm a mortgage broker and I have very close contacts in the financial planning side of things and am set up far better than CIBC could ever do for me. Now please, do not call me again and please, I do not want anything.
Well then, I beleive you have kids, how about some RESP's.
No, I do not want anything *click
When will the banks stop doing this. This was toned down a bit and made shorter. I can't tell you how forecful he was. Our country has a huge amount of unsecured debt, however, the problem as our law makers tell us, is that we take out too many mortgages and are all high in mortgage debt. This is smoke and mirrors. It's the unsecured debt that's the problem in my opinion. Having mortgage debt is to a lot, good debt as you have an asset to back that debt.
The banks make a killing of this unsecured debt and I swear they have some butt kissing they do to the law makers in Ottawa that says we'll allow you to change the mortgage rules and do this and that, however, you can not touch our unsecured debt!
Anyways, that's my rant for the day. I just seriously wish the feds would step up and talk to us in the trenches and make realistic changes. Yeah right, who am I kidding!
Thursday, July 12, 2012
Tuesday, June 26, 2012
What going from 30 years to 25 years means
Here's is a rough idea of what going back to 25 years as opposed to 30 years will do in regards to purchase power and payments.
This is based on the assumption of good credit and no outside debt.
In the past four years my average mortgage amount is roughly $291,000 (this is kind of the norm south of the Fraser)
You would need an income of $48,500 to qualify for this amount of a mortgage. The payment based on today's 3.09% would be $1,241 with a 30 year amortization.
A 25 year amortization will need an income of $53,000 to qualify for this same amount. It will also increase your payment by roughly $150/m
If you have the income of $48,500 you would now only qualify in the amount of $259,000 which means, $32,000 less of a home.
I'm not entirely for or against the reduced amortization. There's pro's and con's to both and honestly when I started out, all we had was 25 years! Yes, I'm starting to become one of the seniors.
Please note: the above numbers are not perfectly accurate however, are deemed to be very close. Everyone is slightly different and there are other variances that can change the numbers i.e. Insurance premiums, actual property tax payments and strata payments etc.
This is based on the assumption of good credit and no outside debt.
In the past four years my average mortgage amount is roughly $291,000 (this is kind of the norm south of the Fraser)
You would need an income of $48,500 to qualify for this amount of a mortgage. The payment based on today's 3.09% would be $1,241 with a 30 year amortization.
A 25 year amortization will need an income of $53,000 to qualify for this same amount. It will also increase your payment by roughly $150/m
If you have the income of $48,500 you would now only qualify in the amount of $259,000 which means, $32,000 less of a home.
I'm not entirely for or against the reduced amortization. There's pro's and con's to both and honestly when I started out, all we had was 25 years! Yes, I'm starting to become one of the seniors.
Please note: the above numbers are not perfectly accurate however, are deemed to be very close. Everyone is slightly different and there are other variances that can change the numbers i.e. Insurance premiums, actual property tax payments and strata payments etc.
Thursday, June 21, 2012
OSFI Toughens Mortgage Underwriting
OSFI’s final mortgage underwriting guidelines are out, sooner than expected.
There are significant changes on the way for a variety of borrowers. TD’s chief economist Craig Alexander told BNN that the impact of these guidelines is equivalent to “well over a percentage point (increase) in mortgage rates.”
However, these guidelines are less concerning than OSFI’s original draft (which proposed things like requalification on renewal). Moreover, in many ways this news isn’t as market-shaking as today’s Department of Finance announcement.
That said, here is what’s changing (Note: this applies to federally regulated lenders only):
There are significant changes on the way for a variety of borrowers. TD’s chief economist Craig Alexander told BNN that the impact of these guidelines is equivalent to “well over a percentage point (increase) in mortgage rates.”
However, these guidelines are less concerning than OSFI’s original draft (which proposed things like requalification on renewal). Moreover, in many ways this news isn’t as market-shaking as today’s Department of Finance announcement.
That said, here is what’s changing (Note: this applies to federally regulated lenders only):
- HELOCs: The maximum loan-to-value on a HELOC will drop from 80% to 65%. That will sting borrowers who leverage HELOCs for productive purposes (e.g., as substitutes for open mortgages, or as a low-cost borrowing source for income-generating investments or small business). However, lenders can still provide a 15% amortizing mortgage on top of a HELOC, for 80% loan-to-value total. OSFI tells us: “Existing HELOCs are not affected, but future offerings are subject to the limits.”
- Qualifying Rates: The qualifying rate is being toughened for conventional mortgages. For variable rates and fixed terms less than five years, it will be “the greater of the contractual mortgage rate or the five-year benchmark rate published by the Bank of Canada.” This will push a small number of borrowers into 5-year fixed mortgages because they won't qualify for shorter terms.
- Stated Income: Going forward, all self-employed borrowers must provide “reasonable” income verification (e.g., a Notice of Assessment). Most lenders already have such policies. It appears that true “no-income documentation” stated income mortgages are officially a thing of the past at mainstream lenders.
- Down Payments: “Cash back should not be considered part of the down payment,” says OSFI. This effectively eliminates 100% financing, and is one of the most common sense guidelines of them all.
Federally regulated lenders have until “no later than fiscal year-end 2012” to comply with these guidelines. That ranges from October 31, 2012 for major banks to March 31, 2013 for other institutions). However, OSFI expects them to comply sooner if possible, so we may see some of these changes within a few months, if not weeks.
There’s no telling yet if provincial regulators will impose the same guidelines on the lenders they regulate (like credit unions).
Information directly from http://www.canadianmortgagetrends.com
Tuesday, June 12, 2012
Canadian Home Income Plan - CHIP
So, what is CHIP, why CHIP, and why now?
What is CHIP?
- The Canadian Home Income Plan (CHIP) is a reverse mortgage giving seniors access to as much as 40% of their equity, with NO PAYMENTS for as long as they live in the home. Instead of paying monthly, the interest is simply added to the mortgage balance that becomes due when the home is sold.
- CHIP is designed for clients that are 55 or older, lack cash flow, and don’t want to move.
Why CHIP?
- There is no credit check, and no debt servicing. The approval is simply based on the client’s age and the property.
- There are many reasons to take a CHIP mortgage:
-A traditional
mortgage requires a monthly payment that many simply can’t afford, so they
can’t access their equity without selling the home they love. Even an LOC
will eventually run out of the ability to pay itself, still
leaving the client with a payment they truly can’t afford.
-One spouse
has passed away, leaving the survivor with the same monthly debts, but half the
monthly income. CHIP can give the cash flow needed to keep on going.
-The money can
be used for anything: Investing to increase cash flow, paying out of
foreclosure, paying property taxes, debt consolidation, early inheritance so
they can enjoy giving the money without the worry of paying for it, higher
quality of life, etc.
- With a 15 year average home appreciation of 6% in Canada, and the reverse mortgage typically going no higher than 40% LTV, history has shown that equity erosion is really not something to be worried about.
Why now?
- CHIP received bank status in Oct 2009, lowering cost of funds, and allowing the product to be offered at a much more reasonable interest rate. CHIP offers, variable, 6 month, 1, 3 & 5 year terms. Call or email for details.
- The baby boomers are reaching retirement years, and many have arrived with more debt and less income than they had planned for.
- 84% of seniors want to stay in their home, but with limited cash flow, monthly debts, and a dwindling retirement fund, many are forced to sell the home they love and downsize to live.
- Ever tightening mortgage qualification rules are making it harder for people to access their equity, so no credit checks and no debt servicing makes this an appealing product.
Wednesday, June 6, 2012
OSFI nixes requalifying guideline
From CAAMP’s mouth to OSFI’s ear. The federal regulator issued a
letter Wednesday clarifying its position on re-qualifying borrowers at
renewal -- effectively maintaining the status quo and confirming
CAAMP's understanding.
“The following provides a brief description of OSFI’s decisions on key issues, which will be reflected in the final Guideline,” writes the regulator in a letter sent to federally regulated financial institutions Wednesday. “Re-qualification at Renewal – current practice regarding residential mortgage renewals has served FRFIs well. OSFI agrees, for example, that having a good payment record is one of the best indicators of credit worthiness. OSFI, therefore, expects that FRFIs themselves will remain responsible for deciding what level of review to place on borrowers’ qualifications at the time of renewal.”
The letter confirms the message coming from CAAMP CEO Jim Murphy, the association leader telling MortgageBrokerNews.ca last week that OSFI was prepared to hold its fire on the most contentious component of its draft guidelines for mortgage underwriting.
At the same time, the message confirms that the regulator will uphold its guideline reducing the
the maximum loan-to-value ratio for HELOCs to 65 per cent.
Still, brokers appeared most concerned about the possibility of lenders having to re-qualify clients at each and every renewal.
The OSFI decision may leave some room for lenders to do just that, however.
"FRFI renewal practices should be articulated in internal policies governing their underwriting of residential mortgage loans," writes OSFI. "FRFIs, however, will be expected to refresh the borrowers’ credit metrics periodically (not necessarily at renewal) so that FRFIs can effectively evaluate their credit risk.”
http://www.mortgagebrokernews.ca
“The following provides a brief description of OSFI’s decisions on key issues, which will be reflected in the final Guideline,” writes the regulator in a letter sent to federally regulated financial institutions Wednesday. “Re-qualification at Renewal – current practice regarding residential mortgage renewals has served FRFIs well. OSFI agrees, for example, that having a good payment record is one of the best indicators of credit worthiness. OSFI, therefore, expects that FRFIs themselves will remain responsible for deciding what level of review to place on borrowers’ qualifications at the time of renewal.”
The letter confirms the message coming from CAAMP CEO Jim Murphy, the association leader telling MortgageBrokerNews.ca last week that OSFI was prepared to hold its fire on the most contentious component of its draft guidelines for mortgage underwriting.
At the same time, the message confirms that the regulator will uphold its guideline reducing the
the maximum loan-to-value ratio for HELOCs to 65 per cent.
Still, brokers appeared most concerned about the possibility of lenders having to re-qualify clients at each and every renewal.
The OSFI decision may leave some room for lenders to do just that, however.
"FRFI renewal practices should be articulated in internal policies governing their underwriting of residential mortgage loans," writes OSFI. "FRFIs, however, will be expected to refresh the borrowers’ credit metrics periodically (not necessarily at renewal) so that FRFIs can effectively evaluate their credit risk.”
http://www.mortgagebrokernews.ca
Thursday, May 31, 2012
Report: OSFI has the wrong end of the stick
A new report is backing up broker concerns OSFI is about to fix what
ain’t broke – this new research identifying already-reduced
amortizations, low arrears and high levels of homeowner equity.
“Mortgage borrowers are making significant efforts to accelerate repayment, such as voluntarily increasing their regular payments (23 per cent) and making lump sum payments (19 per cent), with some borrowers (10 per cent) doing both,” finds CAAMP's spring consumers' report, released Wednesday. "And approximately 50 per cent of borrowers pay $100 per month (or more) above their required payments.”
The report relies on an online survey of 2,000 Canadians, including 800 homeowners with mortgages. It was conducted by Maritz Research and adds weight to the findings of a CMHC report issued last week.
It also suggests that recent buyers expect amortization periods will be about 20 per cent shorter than their contracted length, mirroring the current reality for many Canadian homeowners.
To boot, the report also suggests 83 per cent of Canadians have at least 25 per cent equity in their homes. Separately and collectively, those findings point to a mortgage market well positioned to handle the challenges of a correction in the housing market and to protect the investment of the vast majority of homeowners.
Brokers are also hoping the findings will encourage OSFI to reconsider some of the underwriting
guidelines it will likely bring into force next month.
Those measures – from re-qualification at renewal to slashing the maximum loan-to-value on HELOCs – are meant to throw up a firewall around Canada’s housing market.
Brokers haven’t been convinced of the need for it.
The position is garnering support outside of the CAAMP research, with the official opposition in Otttawa registering the same concerns as brokers.
"We just need to make sure that people are protected in some of these temporary situations (where they may have lost a job),” said Peggy Nash, the federal NDP’s finance critic, “if they have a good credit record and have never had a problem making their payment."
OSFI has floated the idea of forcing mortgage-holders to re-qualify at renewal, although exactly what that involves remains unclear.
Brokers, and their professional associations, were among the first to balk at the suggestion, arguing it could create the kind of market crisis the proposals aim to overt.
Nash appears to agree, with her party most worried Canadians temporarily out of work could possibly lose their homes. She’s asking the Harper government to back off.
But OSFI has suggested it has little intention of backing down, Its manager of policy developing expressing concern about the country’s ability to meet a significant housing correction head on.
http://www.mortgagebrokernews.ca
“Mortgage borrowers are making significant efforts to accelerate repayment, such as voluntarily increasing their regular payments (23 per cent) and making lump sum payments (19 per cent), with some borrowers (10 per cent) doing both,” finds CAAMP's spring consumers' report, released Wednesday. "And approximately 50 per cent of borrowers pay $100 per month (or more) above their required payments.”
The report relies on an online survey of 2,000 Canadians, including 800 homeowners with mortgages. It was conducted by Maritz Research and adds weight to the findings of a CMHC report issued last week.
It also suggests that recent buyers expect amortization periods will be about 20 per cent shorter than their contracted length, mirroring the current reality for many Canadian homeowners.
To boot, the report also suggests 83 per cent of Canadians have at least 25 per cent equity in their homes. Separately and collectively, those findings point to a mortgage market well positioned to handle the challenges of a correction in the housing market and to protect the investment of the vast majority of homeowners.
Brokers are also hoping the findings will encourage OSFI to reconsider some of the underwriting
guidelines it will likely bring into force next month.
Those measures – from re-qualification at renewal to slashing the maximum loan-to-value on HELOCs – are meant to throw up a firewall around Canada’s housing market.
Brokers haven’t been convinced of the need for it.
The position is garnering support outside of the CAAMP research, with the official opposition in Otttawa registering the same concerns as brokers.
"We just need to make sure that people are protected in some of these temporary situations (where they may have lost a job),” said Peggy Nash, the federal NDP’s finance critic, “if they have a good credit record and have never had a problem making their payment."
OSFI has floated the idea of forcing mortgage-holders to re-qualify at renewal, although exactly what that involves remains unclear.
Brokers, and their professional associations, were among the first to balk at the suggestion, arguing it could create the kind of market crisis the proposals aim to overt.
Nash appears to agree, with her party most worried Canadians temporarily out of work could possibly lose their homes. She’s asking the Harper government to back off.
But OSFI has suggested it has little intention of backing down, Its manager of policy developing expressing concern about the country’s ability to meet a significant housing correction head on.
http://www.mortgagebrokernews.ca
Friday, May 4, 2012
Collateral charge mortgages
Here's another great article I read about collateral mortgages. I'm a huge advocate that we as consumers of mortgages, need to know about these and the potential down falls that come with them.
Few products ignite broker debate like collateral charge mortgages. For Gord McCallum, who will be part of panel of industry leaders discussing the subject at the upcoming Mortgage Summit, the need for broker education on every facet of these complicated deals is key.
“They have their place, but proper disclosure is an important aspect in terms of consumer protection,” says McCallum, broker/president of First Foundations Residential Mortgages in Edmonton.
“What concerns me are the more recent developments where they’re being used across the board for all mortgage products as opposed to lines of credit.”
Collateral charges have been used for lines of credit before, but the ah-hah moment for brokers came when TD began registering all of their mortgages as collateral charge in 2010.
“Some of us saw that as contractual handcuffs at renewal for clients because it took away a lot of the client’s leverage in terms of being able to transfer that mortgage at renewal to another institution,” says McCallum. It also plays a role in renewal pricing, he says. “If you don’t have any leverage the lender will price things less competitively at renewal.”
Collateral charge mortgages also seriously hinder a client’s ability to get secondary financing.
“Clients can’t secure a second mortgage against their property because the collateral charge is registered to 100 per cent of the value,” says McCallum.
Many people don’t know the difference or aren’t being told about how collateral charge mortgages differ from traditional mortgages and what the implications might be, he says.
“It might be a case of finding out too little too late and then being in a position of having to sell your home.”
There are alternatives to collateral charge mortgages, say McCallum, but he would be worried if these products became more popular across the board. “It would be a challenging environment.”
“[Collateral charge mortgages] limit choice and as a broker I can’t be in favour of anything that limits choice for people. I have to value competition and choice,” says McCallum.
“I don’t mind lenders doing things differently, but I think people have to be properly educated about it.
“Is it truly for their benefit or is this seen as a retention tool and margin improvement for the lenders. If it truly benefits the client, brokers will choose it.”
article is from www.mortgagebrokernews.ca
Few products ignite broker debate like collateral charge mortgages. For Gord McCallum, who will be part of panel of industry leaders discussing the subject at the upcoming Mortgage Summit, the need for broker education on every facet of these complicated deals is key.
“They have their place, but proper disclosure is an important aspect in terms of consumer protection,” says McCallum, broker/president of First Foundations Residential Mortgages in Edmonton.
“What concerns me are the more recent developments where they’re being used across the board for all mortgage products as opposed to lines of credit.”
Collateral charges have been used for lines of credit before, but the ah-hah moment for brokers came when TD began registering all of their mortgages as collateral charge in 2010.
“Some of us saw that as contractual handcuffs at renewal for clients because it took away a lot of the client’s leverage in terms of being able to transfer that mortgage at renewal to another institution,” says McCallum. It also plays a role in renewal pricing, he says. “If you don’t have any leverage the lender will price things less competitively at renewal.”
Collateral charge mortgages also seriously hinder a client’s ability to get secondary financing.
“Clients can’t secure a second mortgage against their property because the collateral charge is registered to 100 per cent of the value,” says McCallum.
Many people don’t know the difference or aren’t being told about how collateral charge mortgages differ from traditional mortgages and what the implications might be, he says.
“It might be a case of finding out too little too late and then being in a position of having to sell your home.”
There are alternatives to collateral charge mortgages, say McCallum, but he would be worried if these products became more popular across the board. “It would be a challenging environment.”
“[Collateral charge mortgages] limit choice and as a broker I can’t be in favour of anything that limits choice for people. I have to value competition and choice,” says McCallum.
“I don’t mind lenders doing things differently, but I think people have to be properly educated about it.
“Is it truly for their benefit or is this seen as a retention tool and margin improvement for the lenders. If it truly benefits the client, brokers will choose it.”
article is from www.mortgagebrokernews.ca
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