In the news recently there's been a lot of talk of how TD is now registering ALL their mortgages as collateral mortgages. Some say this is a good thing, I truly believe it's not.
This isn't to say TD is the only one that does this. Most credit unions do and any time you bundle your mortgage with line of credits, visa's etc the same registration takes place.
This can be at 100% of the homes value a little less or in TD's case 125% of the homes value. However, in order to access the funds you have to re qualify. Dumb.
Here's just one example of why in my opinion this is a bad thing. Besides the obvious fact that the banks are giving people access to too much debt.
I have a great couple that just celebrated two daughters weddings. They used their credit cards and line of credit to pay for this. They unfortunately missed a couple payments and now their credit bureau doesn't look so good. So of course to go back to their credit union to advance some of those funds they have available they'll need to requalify. Well they can't.
The proposed solution is to do a one year second mortgage to clear things up and in a year redo their mortgage and roll everything into one.
Makes sense right?
Well in two words, they can't.
Now they're stuck with too much debt and will struggle and struggle to keep their payments up. Of course they should have consulted us first, however, when you're in the moment and you have two girls on you for wedding money, your mind isn't always there!
I just hope they can sustain the debt for another year or two so we can look at a solution at this time.
---------------
Please MAKE SURE that you're mortgage is not registered as a collateral mortgage. The banks wont tell you they're doing it as it ties you into them and their one or two products. The only way out is to do a refinance.
Friday, October 22, 2010
Tuesday, October 5, 2010
Know the penalties:
Knowing the rules of any game, usually gives
you advantage. The same goes for the mortgage
game. No one knows the rules better
than a full time mortgage professional that
deals in the “mortgage game” every day.
With record low rates a lot of borrowers are
choosing to refinance their mortgage to take
advantage of the savings. It’s important to do
the research up front to determine a number of
things:
• What exactly are the savings? Both monthly
and over the balance of my term.
• How much will my penalty be?
• How long will it take to recoup my penalty?
• Is there a way to lower my penalty?
While all points are important, the last one is
key. A true mortgage professional will easily
work through the first 3 points and do a full cost
benefit analysis to refinancing, and determine
your actual penalty and savings down to the
penny. The penalty does play a major role in
this scenario, and here’s where the twist comes
in.
With interest rates being so low right now, most
borrowers in fixed term mortgages will have to
pay an Interest Rate Differential penalty to get
out of their mortgage. These can be significant
as the amount of your penalty is determined by
the “spread” or “difference” between your old
interest rate and what rates are today for similar
terms (i.e. the amount of time you have left
on your mortgage.)
Armed with that knowledge,
there is an opportunity to hedge
yourself and lower your penalty.
If you’re not in a hurry to refinance,
and you believe interest rates have bottomed
out and will increase in the short term,
you can do the following:
• Book today’s rate for 120 days.
• Hope interest rates increase.
• Pay your mortgage off and refinance after
rates have increased.
Your mortgage professional will have to stay on
top of things to make sure your lawyer or notary
orders the discharge/payout statement from
your lender just before funding at the highest
possible interest rate day. That way your penalty
is minimized.
What this scenario accomplishes is the following:
You get your new mortgage at the bottom
of the barrel lowest rate, but your penalty is
determined on a smaller spread. You’ve got the
best of both worlds, lowest rate, and smallest
possibly penalty within the 120 day period.
I’ve performed this strategy many times in increasing
rate environments and the savings can
be substantial. The last client we did this for
saved $4,800 on their penalty by waiting 3
months to fund their refinance. Of course they
paid the higher rate on their old mortgage during
the 3 months, but the penalty savings were
worth more than the interest difference during
that period.
you advantage. The same goes for the mortgage
game. No one knows the rules better
than a full time mortgage professional that
deals in the “mortgage game” every day.
With record low rates a lot of borrowers are
choosing to refinance their mortgage to take
advantage of the savings. It’s important to do
the research up front to determine a number of
things:
• What exactly are the savings? Both monthly
and over the balance of my term.
• How much will my penalty be?
• How long will it take to recoup my penalty?
• Is there a way to lower my penalty?
While all points are important, the last one is
key. A true mortgage professional will easily
work through the first 3 points and do a full cost
benefit analysis to refinancing, and determine
your actual penalty and savings down to the
penny. The penalty does play a major role in
this scenario, and here’s where the twist comes
in.
With interest rates being so low right now, most
borrowers in fixed term mortgages will have to
pay an Interest Rate Differential penalty to get
out of their mortgage. These can be significant
as the amount of your penalty is determined by
the “spread” or “difference” between your old
interest rate and what rates are today for similar
terms (i.e. the amount of time you have left
on your mortgage.)
Armed with that knowledge,
there is an opportunity to hedge
yourself and lower your penalty.
If you’re not in a hurry to refinance,
and you believe interest rates have bottomed
out and will increase in the short term,
you can do the following:
• Book today’s rate for 120 days.
• Hope interest rates increase.
• Pay your mortgage off and refinance after
rates have increased.
Your mortgage professional will have to stay on
top of things to make sure your lawyer or notary
orders the discharge/payout statement from
your lender just before funding at the highest
possible interest rate day. That way your penalty
is minimized.
What this scenario accomplishes is the following:
You get your new mortgage at the bottom
of the barrel lowest rate, but your penalty is
determined on a smaller spread. You’ve got the
best of both worlds, lowest rate, and smallest
possibly penalty within the 120 day period.
I’ve performed this strategy many times in increasing
rate environments and the savings can
be substantial. The last client we did this for
saved $4,800 on their penalty by waiting 3
months to fund their refinance. Of course they
paid the higher rate on their old mortgage during
the 3 months, but the penalty savings were
worth more than the interest difference during
that period.
Monday, October 4, 2010
Mortgage Tightening In Works:
Looks like the Federal Government may be tightening the rules on buying a new home.
This comes as our debt in Canada is now averaging 146% of personal disposable income.
In the US, when we hit the big crisis, roughly the same percentage was registered, which is very high. The Fed's want to look at making sure that this doesn't happen here in Canada.
We don't think that this would happen right away, however, may happen sooner than later. This isn't a good thing as we're already in a very slow market.
The article I read is here http://bit.ly/9HyqB2
This comes as our debt in Canada is now averaging 146% of personal disposable income.
In the US, when we hit the big crisis, roughly the same percentage was registered, which is very high. The Fed's want to look at making sure that this doesn't happen here in Canada.
We don't think that this would happen right away, however, may happen sooner than later. This isn't a good thing as we're already in a very slow market.
The article I read is here http://bit.ly/9HyqB2
Thursday, September 30, 2010
Know the fine print of your mortgage
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
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
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
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