Mortgage Renewal Strategy

Posted on May 17, 2012 by admin

Clients often send us mortgage renewal letters.  It’s interesting how banks try to sell really high rates in these letters – they actually hope someone will buy them.In one case, the bank offered the client a 5-year fixed rate of 5.44%!

In the same time, the bank’s website showed a “Special Offer” rate of 3.59% – exactly for the same mortgage.

Some experienced mortgage brokers can offer you 5-year fixed rate at 3.19% – big difference isn’t it?

It seems it’s the usual way some banks treat their existing customers.  It looks like banks aren’t worried by the fact that people can surf internet and find better mortgage rates.

Banks think they can earn more money by catching those who don’t do this.

So if you want to renew with a bank and you get one of these letters, call your bank and ask them why they’re selling you a high rate. And don’t believe their “It’s our usual rate”.

If you do decide to cooperate with the bank, give them just one chance. Tell them to give you their very best terms at once. After that call a mortgage broker and compare the benefits.

In the end, choose the one who protects your interests.

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Eurozone debt crisis threatens Canadian economy

Posted on May 16, 2012 by admin

According to Finance Minister Jim Flaherty, the eurozone is almost at a turning point at the moment. Nevertheless, there’s still a chance for Greece to avoid a failure.

Otherwise, the consequences will affect not only the Canadian banking sector, but the whole national economy as well.

Mr. Flaherty has already urged the richer European countries to help overcome the debt crisis with a bailout, but there was no response to that.

In his opinion, the European Central Bank’s (ECB) recent refusal to cooperate with troubled Greek banks reflects outrageous failure in duties, implied in forming of a common currency zone.

Such ECB’s decision may cause a serious shock in many financial markets, including Canada and the U.S. In the same time, Flaherty noted he’s still against the International Monetary Fund helping Europe.

Mr. Flaherty said other rich European countries have not contributed enough to solving the debt crisis, so it’s really not fair to put all the heavy work on the IMF.

 

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April 2012 – Canadian housing market activity is up again

Posted on May 15, 2012 by admin

The recent report by the Canadian Real Estate Association (CREA) suggests that national resale housing activity was up again in April 2012.

April sales over MLS® Systems rose by 0.8% from March – it’s the same level as in April 2010.

The report shows that activity either went up or remained unchanged in half of all Canadian markets. In addition to it, Toronto and Calgary reported the largest hikes for the second month in a row.

“Meanwhile, there were almost no trend changes in some of the local real estate markets in April,” – said Wayne Moen, CREA President. “And although Vancouver and Toronto still diverge, making a significant impact on the national statistics, Canada is quite a big place.”

According to CREA, the national average price (not seasonally adjusted) for houses sold last month was $375,810. It’s 0.9% higher than a year ago.

“Toronto market activity is somewhat stronger this spring than it was during the previous one. This time higher-priced sales activity is rising and supporting the average prices increase. Representing the Canadian housing market with the highest activity level, Toronto is considered to be the largest factor influencing national average price.”

“It should be noted that netting Vancouver out of the national average price calculation yields a 4.9% year-on-year growth. In case we remove Toronto’s datait’s a 2.2% decrease in prices. Netting out both Vancouver and Toronto gives a 3.1% average price increase. In general, it’s quite a modest price gain, supported by the balanced market conditions across Canada.”

 

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Service of the Best Mortgage Broker…is that really FREE?

Posted on May 14, 2012 by admin

Lately I’ve had an interesting conversation with my friend who is postponing house purchase due to the lack of required down payment and some other qualification issues. Like many of us he is self-employed and investing all available cash into his business. Every time I visit his store we briefly discuss housing market conditions, he complains about lack of down payment and both of us complain about luck of free time … normal Friday’s talk. What has stroked me last time was his comment about our advertising campaign. “Why didn’t you advertise that your service as a Mortgage Broker is FREE for your clients?” -He asked me after our usual chat. “Because it is obvious and most people know that”, – I replied.

“NO, it is not! Most people in our community expect mortgage broker to charge them hefty fee!”, – he said without his usual smile.

Before we discuss why we did not charge fee from most of our clients, I have to say the following: “Mortgage brokers are getting paid commission by the bank!” Only in some cases with non-prime lending we are getting paid by client not the lender.

They say the best broker is the one who doesn’t sale loans, but who educates borrowers. Meanwhile, there are always those who prefer to think that only commissions’size is the main priority.

In other words, there are absolutely different brokers at the market.

Saying they are all equal is the same as believing there are no lawyers who overbill clients or mechanics who fix only what’s already broken. Of course, there are thousands of professionals who put their clients’ interest first. But in the same time we’ll always see those who don’t.

As a matter of fact, consumers are not the same either. Some borrowers prefer to focus on time savings, profitable closing conditions, debt-reduction, proper credibility level and broker’s assistance and advice before and after closing date. Others are ready to do everything for getting even 5bps (0.05%) lower interest rate.

We can tell you for sure that best mortgage advisers never recommend bad products for, at least, three main reasons.

First of all, many of them tend to choose an honest way of earning money. They sleep safe and sound and wake up with a clear conscience. Such brokers will offer you the lowest rate available at once. Moreover, some of them may even refer you back to your bankif they see it’s really more profitable for you.

The second reason is quite simple –right decisions will help the business. Clients can feel when brokers do not help them, but try to sell a certain mortgage product.

And the last but not the least is that good referrals always mean more potential clients. No one will agree to work with the specialists who can’t be trusted.

These three rules are the basis for a long-term successful business. It’s these characteristics that define really the best brokers at the market.

And YES, OUR SERVICE IS FREE FOR MOST OF OUR CLIENTS!

 

Posted in Best mortgage rate, Canadian economy, Home equity loan, House mortgage, Mortgage broker, Mortgage rate, Mortgage refinance, Private mortgage, Real estate trends | Tagged , , , , , , , | Leave a comment

Canadian economy shows record high job gains

Posted on May 11, 2012 by admin

“Give me a mortgage at 0% but if I didn’t have a job I wouldn’t be able to pay it” – said one economist long time ago and this will always be true. That’s why we strongly believe in direct correlation between job and housing markets.

During the past two months Canadian employers have created more than 140,000 jobs – it’s a sharp increase, especially, after six months of weak results. The main question is for how long the tendency remains.

58,200 new jobs in April show a significant demand growth on the goods side of the economy. Among the most popular sectors for new job places were the following: construction, natural resources, manufacturing and agriculture industries.In the same time, this employment increase is not even. Certain resource-rich regions have shown higher gains, while Ontario doesn’t seem to be on top. The sector of public administration shows lower activity, as the spending was strictly reduced.

Nevertheless, the unemployment rate was up from 7.2% to 7.3%, according to Statistics Canada.

“Canadian employment may follow the old trend, when job gains are high in the first half of the year, but quite moderate – in the second,” – said Douglas Porter, deputy chief economist at BMO. “Anyway, such sharp job increases will definitely silence concerns about weak economic growth.”

We can dispute for hours about quality of the new jobs created during last 2 months, uneven distribution and low pay details for some positions, however 140,000 Canadians feel more secure and still able to meet their monthly obligations including housing expenses!

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Wrong mortgage terms might cost you way more than low interest savings

Posted on May 10, 2012 by admin

Today it’s very easy to find a low mortgage rate online. If you’ve ever visited any rate comparison sites, you know there are quite a lot of them in the Internet.

But when it comes to finding the best mortgage terms (which means the length of the mortgage contract and all the necessary details of the agreement), it gets more difficult. Potential borrowers often can’t fully understand the terms they are offered, so they need to consult a mortgage professional.

If you choose a closed mortgage with the wrong term, you’ll be tied to your rate till the maturity date. Otherwise, you’ll have to pay a penalty for breaking your mortgage. And it’s not the worst variant yet. In case of a “no-frills” mortgage, when you get the lowest rate, but the strictest conditions, you may be not allowed to change a lender, unless you decide to sell the property.

Generally, mortgage terms are divided into two main groups: Long-term fixed rates for 4,5,7 or 10 years; short-term rates, including variable rates andfixed termsfor 1, 2 and3-years.

Long-term mortgages may be profitable in the following cases:

• You can’t afford 25%-30% payment increase, as it will be a serious financial stress for you. (It’s the hike short-term borrowers may face if economists are right and the rates rise as they predict).

• You have “emergency fund” to cover even less than half a year of living expenses.• You possess minimal equity in your house.

• It’s possible that your earnings will decrease because of job instability, soon retirement, variable income level, educational or extended care leave and so on.

• You prefer to have a strict certainty when making financial plans concerning your income property.

Meanwhile, a short-term mortgage is a good choice to consider if:

• You find a short-term rate that’s noticeably lower than current long-term rates, so you’re able to make larger-than-required mortgage payments.

• You plan to pay off a large part of your mortgage or sell your home during the next 3 years.

• Your credit is not so good, so you’re searching for a non-prime mortgage to re-establish your credit and then qualify with a prime lender.

• You want to refinance soon in order to get access to your equity, as you need money for certain life events, investment, education, etc.

• You are sure the rates won’t go up significantly during the next 12 months, but you still can afford the potential increase.

If you decide that a shorter term is more profitable for you today, you may like to choose a three-year fixed mortgage.As many economists predict, interest rates may start rising moderately late this year or early 2013. In the end, you won’t have to discharge your mortgage early.

Today the average three-year mortgage rate is about 2.89%. As a matter of fact, it’s even less than most current variable rates. In addition to it, it guarantees you a fixed rate for 3 years.After that you can renew and choose better terms and rates. Some people suggest that variable rate discounts may improve in time, so you can consider this variant as well.

This article highlights only some of the important details one should pay attention to while choosing a mortgage. There are many others issues you need to clear up before making any decisions, that’s why it’s always better to consult a mortgage professional in order to get the most profitable mortgage product.

Posted in Best mortgage rate, Canadian economy, Home equity loan, House mortgage, Mortgage broker, Mortgage rate, Mortgage refinance | Tagged , , , , , | Leave a comment

RBC’s CEO, CMHC and CAAMP don’t see housing bubble in Canada

Posted on May 9, 2012 by admin

“Bubble – trouble” talks are getting more and more overheated and today we have collected another set of opinions from Canada’s top banker and other major players in housing market. All of them agree on one thing –there is no clear evidence of a housing bubble in Canada, however some local pockets are more vulnerable and might be slightly overvalued.

“Of course, there might be certain more vulnerable areas at the whole marketplace, but we still remain in quite a comfortable condition,” -noted Gordon Nixon, chief executive officer of RBC. “Honestly, I would really like all this rhetoric come down a bit.”

According to economist Paul Fenton, real estate prices in Canada are overvalued by about 10%, however, in his opinion, housing doesn’t represent any threat to the function of the nation’s financial system.

“Today many people ask if there is a real bubble at the Canadian housing market. And we can answer that: No, there isn’t,” – said Jim Murphy, chief executive officer of the Canadian Association of Accredited Mortgage Professionals. The association’s recent research shows that growth of mortgage credit remains below the average level.

“We don’t see clear evidence of a housing bubble,” – Canada Mortgage & Housing Corp. noted in its annual report. “Meanwhile, CMHC keeps on monitoring all the housing prices changes and other important factors which may affect the situation: demographic and economic tendencies, financial conditions and condominium markets in all major urban centers.”

 

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CMHC in “good financial health” according to its annual report

Posted on May 8, 2012 by admin

According to the recent annual report, Canada Mortgage and Housing Corporation’s (CMHC) capital buffers are actually twice larger than required by Office of the Superintendent of Financial Institutions (OSFI).

The report provides results of the latest CMHC stress-testing. They suggest that the Corporation is still “within the acceptable risk level”. This stress-testing included different scenarios of long period of high unemployment and a sharp house price correctionfor few years in a row.

“As a result, we came to the conclusion that CMHC’s probability of insolvency is only 0.5%”-said vice-present Steven Mennill.

It should be noted that today the total insurance outstanding of CMHC is C$567 billion,which is quite close to the legislated limit of C$600 billion. According to CMHC, C$243 billion of it stands for portfolio insurances, which are used by banks in cases when the insurance is not obligatory (in case of 20%+ downpayment or equity). Under pressure from government CMHC said it plans to reduce the amount of such portfolio insurances.

In the same time, CMHC doesn’t see “clear evidence” of overheating in Canada’s condominium market, although policymakers (especially, the Finance Minister) are seriously worried about the sharp pace of multi-unit construction projects.

CMHC economists expect the Bank of Canada to keep its key lending rate at 1% formost of 2012. In the end, short-term mortgage rates mayalso stay extremely low and, of course, supportthe housing demand.

 

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Europe’s at risk of a longer debt crisis

Posted on May 7, 2012 by admin

Recently voters in France and Greece spoke out and their opinion turned out to be quite categorical – they are against austerity measures.

Unfortunately, such an answer puts the next instalment of Greece’s bailout up in the air. Moreover, it threatens to prolong the European debt crisis.

It should be noted that in less than two years leaders or ruling parties were thrown out by the voters in seven European countries.

Today the most serious problem of Europe is Greece. Here certain left-leaning parties,opposing austerity, have gained strong popularity among the voters.

The election of Socialist President François Hollandein France may cause the so-called “growth pact” for Europe. It could include new spending on infrastructure projects and the followingreduction of spending cuts.

According to David Rosenberg, chief economist and strategist at GluskinSheff& Associates in Toronto, Europe will hardly solve its debt problems, unless the European Central Bank monetizes euro area debt or financially more stable Germany lets other countries use its “credit card”.

“Now there’s a mess in the whole Europe: not only politically, but also economically and fiscally,” – Mr. Rosenberg noted.

We see “mess in Europe” as one more reason for Bank of Canada to be very cautious before starting to raise interest rates.

 

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Lenders are cancelling 35 years amortization on conventional mortgages

Posted on May 4, 2012 by admin

We just got confirmation that one of the biggest mortgage lenders will no longer allow 35 years amortization on conventional mortgages, starting May 07.

Today many borrowers are already facing certain difficulties with finding 35-year amortizations on conventional mortgages. The reason is the recent announcements from OSFI and Big Banks comments.

That’s an alarming bell and rest of mortgage lenders might follow the suit. We are very concerned that standardization of mortgages will leave consumers with less choice and Big 6 Banks will dictate their rules.

The OSFI’s worries about strict lending control are quite reasonable. But the deal is that the only case when extended amortizations may be dangerous for the national economy is when they are necessary for qualification, and not when they are used by well-qualified borrowers to improve cash-flow or investment purposes. In the end, only major banks will benefit from such changes.

This move came right after the federal government didn’t react to numerous calls from certain economists and bank executives to cut the maximum amortizations. Meanwhile, brokers suggest that such reduction may cause additional difficulties for those who are looking for more flexible mortgage solution or simply wants to be able to qualify on higher real estate prices.

Nevertheless, many other economists don’t agree, saying that often 30+ year amortizations are used for getting more cash each month – as a result, it may be spent paying down higher-interest debt or making other profitable investments.

We are still offering up to 40years amortization on conventional mortgages (down payment more than 20%) however this may change very soon.

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