Tag Archives: working with a mortgage broker

Variable rate mortgage rates hovering on historic low

With the Royal Bank of Canada’s implementation of the latest round of mortgage rate increases last week, banks and other major lenders have begun lowering the discounts for floating rate mortgages.
 
Even with the new 2.6 per cent rate average on variable-rate products, however, this is still considered by industry observers to be among its historically lowest levels. To compare, fixed-rate mortgages with five-year terms currently enjoy a rate of 3.04 per cent.
 
Experts noted that such stretches of low rates allow variable-rate buyers to save more, although the option essentially removes the safety blanket of a stable rate throughout the term. The RBC raise gave incentive to some banks to get in lockstep, though.
 
“The spreads were narrowing and that causes us to raise rates,” Bank of Nova Scotia’s real estate lending head David Stafford told the Financial Post, elaborating on the bank’s move to implement a similar average on variable-rate products.
 
Industry players said that these numbers are the reason why lenders continue to offer cut-off primes of 50 basis points for variable rate mortgages, as banks profit less from floating rates than from borrowers locking in their loans.
 
“We kind of chuckled when they raised rates because we have some lenders dropping rates. The big banks are trying to move people out of the variable (and get them to lock in),” MonsterMortgage.ca owner and broker Vince Gaetano told the Financial Post.
 
Source: Mortgage Brokernews

Insuring your mortgage: Analyze the costs, benefits

(NC) When you go to your lender for a mortgage, they may ask whether you want to insure your home loan with an array of optional financial products to make your home ownership more secure. But this comes at a price.

 

These products include mortgage life insurance, mortgage disability insurance and title insurance.

 

Your lender must provide easy-to-understand information about these products; it’s up to you to read it and ask questions to ensure that you understand your options.

 

You do not have to buy any of these three types of insurance to get your mortgage. In fact, financial institutions may not pressure customers to buy life, disability or title insurance in relation to a mortgage.

 

Mortgage disability insurance

 

Why buy this insurance? It provides the certainty of knowing that your mortgage will be paid even if you are incapacitated. The insurer will make the mortgage payments – for a specific period of time – to your lender if you cannot work because of a severe injury or illness.

 

What you need to know: This would be an ongoing cost for the duration of your mortgage. Some insurers only cover specific illnesses or injuries, and they don’t usually cover pre-existing conditions. Before purchasing such insurance, ask your employer whether they offer similar coverage. Compare costs before agreeing to buy.

 

Mortgage life insurance

 

Why buy this insurance? It ensures that, in the event of your death, your mortgage will be paid off so your loved ones do not have to worry.

 

What you need to know: This would be an ongoing cost for the duration of your mortgage. You may already have this coverage through an existing life insurance policy. The benefits of your existing coverage could be used to pay off or pay down the mortgage in the event of your death.

 

Title insurance

 

Why buy this insurance? If you are worried about title fraud—criminals stealing your identity to get a new mortgage on your property, or fraudulently transferring your title to themselves and then selling or mortgaging your home.

 

What you need to know: This insurance consists of a one-time, upfront fee. Lender title insurance protects the lender from losses until the mortgage has been paid; homeowner title insurance protects the homeowner from losses related to title as long as he or she owns the home, even if there is no mortgage.

 

More information is available at itpaystoknow.gc.ca.

 

Source: www.newscanada.com

4 questions to ask before buying a rental property

Owning a rental property can be a profitable investment — but it’s not for everyone. Here are some questions to ask yourself before you take the plunge:
 
By Krystal Yee
 
rental
 
If you’re thinking of purchasing an investment property to rent out to tenants, you will need to do some serious research. There’s much more to being a landlord than putting up an ad on Craigslist — it’s like taking on a second job. You will need to factor in realistic financial projections, and carefully weigh the pros and cons of your decision. Here are a few things to consider before purchasing a rental property.
 
1. Do you have enough saved for the down payment? Under Canada’s new mortgage rules, you must come up with a down payment of at least 20 per cent for a small rental property holding from one to four units. This rule does not apply to borrowers whose principal residence also includes rental units.
 
2. How much income will the property generate? You will need to do some research into the neighbourhood. What does rent typically cost, and what is the vacancy rate in that area? Don’t assume that you will always have a tenant — according to the Canada Mortgage and Housing Corporation (CMHC), the average vacancy rate in Canada’s 35 major centres is 2.5 per cent. To be safe, assume a four or five per cent vacancy rate into your financial projections, and don’t forget to calculate potential costs, such as repairs and maintenance
 
3. Can you be a successful landlord? Being a landlord is a second job. It’s not just about finding a tenant and letting the money come in every month. Not only do you have to be available to field emergency calls and keep up with maintenance such as routine fixes, yard work and even shoveling snow, but if you rent to the wrong tenant, you might have even bigger problems to deal with, such as non-payment of rent. Hiring a property manager can help, but that will greatly reduce your monthly profit from the property — and you never want to be in a negative cash-flow situation.
 
4. How will deductions affect your profits? By deducting certain expenses from your income, you can reduce the taxes that you owe. Applicable expenses include mortgage interest, property tax, insurance, property management, maintenance and utility bills. You can also deduct any losses from your rental property. If your expenses exceed your rental income, you can subtract your losses from any other source of income you have coming in.
 
Purchasing a rental property can be a great way to diversify your investment portfolio, but it is a big commitment. Being a landlord is time-consuming, and not for people who are interested in an easy, passive income stream.
 
Want to learn more? Check out the Canada Revenue Agency’s Rental Income Guide, where you can get more information on deductible expenses, and most other issues regarding rental property.
 
Krystal Yee is a marketing professional living in Vancouver. She writes about personal finance at Give Me Back My Five Bucks, and the Toronto Star’s Moneyville.ca.

Source:canadianliving.com
 
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LISA GRYBA INFORMATION

LISA GRYBA MORTGAGE BROKER

Finance minister announces down payment rule changes

by Justin da Rosa 11 Dec 2015
 

 

New down payment rules will go into effective February 15, 2016.

 
“The Government’s role in housing is to set and maintain a framework that is equitable, stable and sustainable. The actions taken today prudently address emerging vulnerabilities in certain housing markets, while not overburdening other regions,” Finance Minister Bill Morneau said in a release. “They also rebalance government support for the housing sector to promote long-term stability and balanced economic growth.”
 
The minimum down payment for new insured mortgages will increase from 5% to 10% for the portion of the house price above $500,000, the finance ministry wrote.
 
Minimum down payment for properties up to $500,000 will remain at 5%.
 
The changes are meant to reduce taxpayer exposure while supporting long-term stability of the housing market, according to the ministry.
 
“This measure will increase homeowner equity, which plays a key role in maintaining a stable and secure housing market and economy over the long term,” Morneau said. “It also protects all homeowners, including many middle class Canadians whose greatest investment is in their homes.”
 
Source: RepMag.ca

Breaking a mortgage can cost more than you expect

(NC) Thinking of breaking your current mortgage before the end of its term to take advantage of lower interest rates elsewhere?

Many Canadians believe their current lender can only charge three months’ interest—usually just a few thousand dollars—to break an existing mortgage.

 

That’s not necessarily the case, and far too many homeowners who have broken their mortgage contracts have been shocked by penalties amounting to tens of thousands of dollars.

 

“All homeowners want the best mortgage interest rate available, so switching lenders to improve your rate can be very attractive,” says Lucie Tedesco, commissioner of the Financial Consumer Agency of Canada. “But proceed with caution before you switch lenders.”

 

“It’s important to recognize that a mortgage is a binding contract. If you want out of one mortgage to switch to another, the penalties and fees for doing so could drastically reduce (in some instances) the financial benefit of the new rate. You can avoid nasty surprises by reading your mortgage contract and talking to your current mortgage lender before deciding to switch.”

 

Mortgage penalties

 

Your contract may provide for a prepayment penalty of just three months’ interest or it may specify a very different calculation. Many mortgage contracts give the lender the option of charging you an amount very close to what you would have paid in total interest if you had kept your mortgage to the end of the term. This amount can potentially be significantly greater than three months’ interest.

Remember, there may also be other costs associated with switching a mortgage, such as legal, appraisal, administrative and other fees.

 

Understand your mortgage

 

Every mortgage contract contains different terms and conditions. Federally regulated financial institutions are required to provide key information in a box at the beginning of your mortgage agreement, including information about prepayment privileges and charges.

 

Banks must also include in mortgage documents a toll-free number you can call to speak to a knowledgeable person for detailed information on prepayment penalties.

 

As a consumer, you have the responsibility to read your mortgage agreement. If you want to switch to another lender and you do not understand the cost of paying off your mortgage early, visit your banker, ask questions, get answers and make an informed decision.

 

More information is available at itpaystoknow.gc.ca.

 

Source: newscanada.com

Mortgage rates are rising

Expect an increase of up to 25 basis points

 
Mortgage rates have been so low, for so long, that it almost feels like they’ll never rise. Even the Bank of Canada’s latest decision to keep overnight target rates at 0.5% is the equivalent of saying: We’re keeping with the status quo.
 
But according to media reports banks have quietly increased their own prime lending rate by 0.5%, thereby reducing the discount for new variable-rate mortgage amounts.
 
“It’s a bit overstated,” says RateSpy.com founder and independent mortgage broker, Robert McLister, but the fact remains: lenders have tightened the discount new borrowers can expect on variable-rate mortgages.
 
The most competitive lenders—typically those that work with independent mortgage brokers and specialize in mortgage lending—raised their rates by 0.15% to 0.25%, while some major banks increased their variable rates by as much as 0.25%.
 
How does that translate if you’re currently shopping for a mortgage? It means you can no longer find a 2.39% five-year variable rates, says Jake Abramowicz, an independent mortgage broker. Now, the new low is around 2.79%.
 
“There are two reasons why we’re seeing this small rate increase,” says Abramowicz. “In anticipation of the U.S. Fed raising rates in mid-December and because a lot of lenders have reached capacity and want to slow down their new mortgage business.”
 
McLister adds that other, unseen, factors are also prompting these small rate increases. “Canadian lenders are being hit with market risk premiums, higher deposit rates, more restrictive securitization rules and higher capital requirements.”
 
In fact, decisions made by the federal government in the last few years have created a more expensive environment for banks and mono-lenders to do business, says McLister. “Rising rates are a side effect of government policies designed to reduce financial system risk.”
 
What does it mean for the end-user: the home buyer? On a $360,000 mortgage, the newly increased rate would add $72 to a person’s monthly payments. On a $720,000 mortgage, payments would increase by $144 per month.
 
The basis point increase certainly adds to a person’s monthly mortgage payment, but fears of the mortgage market grinding to a halt are exaggerated, says Abramowicz. “I don’t think a 30 to 40 basis point increase in rates will cause a slowdown in the housing market.”
 
Also, the recent increase doesn’t mean that rates won’t fall again in the near future, says McLister. But absolute rock-bottom rates are over. “Policy changes [in the last few years] will keep rates higher for years to come,” says McLister.
 
And governmental policy tweaks aren’t over, yet. The feds are seriously considering creating a tiered minimum down payment system, which could see force buyers to save a minimum 7% to 10% down payment before buying a home valued over $500,000. The feds are also toying with the idea of implementing lender insurance deductibles—where banks would be forced to pay a deductible on any mortgage default insurance claim they make. At present the banks can make a claim and get fully reimbursed for the defaulted loan, but are not required to pay a fee.
 
by Romana King for MoneySense, December 7th, 2015
 
Source: MoneySense.ca

Six ways to boost your credit score — From Peter Paley Winnipeg Mortgage Broker

Six ways to Boost your credit - nov2015
 
Six ways to boost your credit score
 
Your credit score is essentially your passport to financial opportunities. With a possible range of 300 to 900, your number tells lenders what kind of a risk you are likely to be as a borrower.
A low credit score can prevent you from getting the lowest mortgage rate, or even from getting a mortgage at all. That’s why it’s important to know the six credit behaviors that can keep your score high, or give it a boost!
 

  1. Know what you’re working with. Get a copy of your report and see what your lender sees. Credit reports can be ordered for free through the mail or, for a small fee, online at www.equifax.ca
  2. On time, all the time. The single biggest factor in your credit score is having a timely bill payment history. Start today with a commitment to never let a bill get past due.
  3. Know your limits. Your credit score is based on your balances relative to your available credit. Look at your credit limits and try not to use more than half of the available amount.
  4. A longer history is better. Don’t cancel your oldest credit card. In fact, get advice before you cancel any cards. A long steady history of using cards responsibly demonstrates trustworthiness.
  5. Be selective. When you’re asked “would you like to apply for our Store Card to save $X dollars on your purchase?” Don’t do it. These pitches can be a credit pitfall. Regularly looking for more credit will flag you as a potential credit risk.
  6. Keep it balanced. Creditors like to see that you can handle a wide variety of credit types.

I would be happy to review your situation. If you need to improve your score, I can outline your best options for credit improvement. If you want to get a mortgage while you work on bettering your score, I can also advise how that may be possible.

 

Financial Comfort & Joy

It’s tempting to overspend at this time of the year so take a quick assessment of your financial situation before you get started on your holiday shopping. It can help make sure you don’t suffer from “plastic shock” when your credit card bills arrive in January. Are you carrying too much credit card or other high interest debt? Are you struggling to keep up with your monthly obligations?

If so, it might be worth having a conversation about streamlining your finances now, before the holidays are upon us. You may be able to take advantage of today’s great rates to consolidate your debts into a smart plan with sensible payments. If you are worried that your locked-in mortgage means your options are limited, I can do a quick review.
 
There’s a good chance the savings each month will far outweigh any penalties. Give me a call. I love to help at this time of year. Financial comfort and joy: what a wonderful gift!
 
paley mortgage team feb 2015

 

Peter Paley Mortgage Associate Send an EmailVisit Website

 

What happens to your credit rating when you miss a mortgage payment ?

Your mortgage payment doesn’t always show up on your credit report, but if you are late on multiple payments, it could affect the interest rate you’re offered from the bank when your mortgage comes up for renewal again.
 
If you miss three consecutive payments or more in a row, it will lead to foreclosure proceedings, which is when the bank or lender starts the process of legally taking ownership of your property due to the lack of payments. Banks or lenders don’t want to own your home, but if the lender isn’t getting paid, it will try and sell the property in order to reduce its losses. Foreclosure shows up under the public record portion of your credit report.
 
You may assume that bankruptcy is the worst thing you can do for your credit; however, if you are applying for mortgage financing, going through a foreclosure is the absolute worst thing you can do for your credit. Bad credit can be rebuilt fairly quickly, but very few lenders will look at providing financing for you if you have a previous foreclosure showing up on your credit report, regardless how strong your current credit is.
 
If you find yourself in a situation where you may not be able to make your mortgage payments, contact your mortgage lender or mortgage agent to find out what can be done. The same thing is true with any creditor.
 
If you don’t think you’ll be able to make a payment to any one of your creditors, it is a good rule of thumb to contact them to see if something can be worked out, especially if you contact them before the due date. I’ve never seen the attitude of pretending it will all go away actually work for anyone.
 
I understand that despite your best efforts, an emergency may come up, preventing you from being able to make a payment. However, the banks still feel that it is your responsibility to keep track of your accounts and pay your bills on time. Get your head around this rule and you will have a great foundation to always have amazing credit.
 
BOOK EXCERPT by Richard Moxley
 
Contributed to The Globe and Mail
 
Published Monday, Jul. 20, 2015 6:00AM EDT
 
Last updated Tuesday, Jul. 21, 2015 8:55AM EDT
 
Excerpted with permission from The Nine Rules of Credit: What Everyone Needs to Know by Richard Moxley, Published by Self-Counsel Press.
 
Source: theglobeandmail.com

5 Reasons to Hire a Real Estate Professional Today !

5 Reasons To Hire A Real Estate Professional Today | Keeping Current Matters
 
Whether you are buying or selling a home, it can be quite an adventurous journey. You need an experienced Real Estate Professional to lead you to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO.
 
The 5 Reasons You NEED a Real Estate Professional in your corner haven’t changed, but have rather been strengthened due to the projections of higher mortgage interest rates & home prices as the market continues to recover.
 
1. What do you do with all this paperwork?
 
Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true Real Estate Professional is an expert in their market and can guide you through the stacks of paperwork necessary to make your dream a reality.
 
2. Ok, so you found your dream house, now what?
 
According to the Orlando Regional REALTOR Association, there are over 230 possible actions that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, who knows what these actions are to make sure that you acquire your dream.
 
3. Are you a good negotiator?
 
So maybe you’re not convinced that you need an agent to sell your home. However, after looking at the list of parties that you need to be prepared to negotiate with, you’ll realize the value in selecting a Real Estate Professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people that you will have to be knowledgeable with and answer to, during the process.
 
4. What is the home you’re buying/selling really worth?
 
It is important for your home to be priced correctly from the start to attract the right buyers and shorten the time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to the National Association of REALTORS, “the typical FSBO home sold for $208,700 compared to $235,000 among agent-assisted home sales.”
 
Get the most out of your transaction by hiring a professional.
 
5. Do you know what’s really going on in the market?
 
There is so much information out there on the news and the internet about home sales, prices, mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively price your home correctly at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a low-ball offer?
 
Dave Ramsey, the financial guru advises:

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”

Hiring an agent who has their finger on the pulse of the market will make your buying/selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.
 

Bottom Line:

 
You wouldn’t replace the engine in your car without a trusted mechanic. Why would you make one of your most important financial decisions of your life without hiring a Real Estate Professional?
 
Source: KeepingCurrentMatters.com

CMHC to Allow 100% of Suite Income

The market for houses with basement apartments is about to get a little hotter. CMHC has announced it will allow 100% of the rental income from legal secondary suites to be used when qualifying for a mortgage. Currently it allows 50%.
 
The nation’s largest default insurer says the move is meant to “facilitate affordable housing choices for Canadians.”
 
“Secondary rental suites are recognized as a source of affordable housing offered at a cost that is often lower than those for apartments in purpose built rental buildings,” it adds. Secondary/basement suites also give lower-income Canadians the chance to live in single-family residential neighbourhoods.
 
The new rule takes effect September 28, 2015.
 
“This is definitely good news for anyone who is looking to buy a home and subsidize the cost” with a renter, says Vancouver-based broker Peter Kinch, of DLC’s Peter Kinch Mortgage Team. “…The ability to utilize 100% of the rental income to qualify for the mortgage…can certainly make the difference for many homeowners and may move a larger number of homebuyers from condo purchases to a single-family home with a mortgage helper.”
 
Broker Marg Green, of Concierge Mortgage Group, agrees that “there will be a big demand for it,” but rightly notes that more clarity is needed on what CMHC considers a legal suite. “What is legal? Is it fire retrofitted? Is it registered with the city? If the suite isn’t legal, lenders generally won’t use the rental income (for qualification purposes).”
 
Here’s what we’ve gathered thus far, with respect to what’s required to use 100% of suite income with CMHC:

  • The property must be owner-occupied.
  • The property being insured can have only two units (i.e., a duplex or a single home with a legal secondary suite).
  • Rental income cannot be used if the suite is “illegal/non-conforming” but “legal non-conforming” is okay. (Non-conforming means that the suite was grandfathered in before zoning/regulations restricted such units. You can check with the city to confirm if a suite is legal.)
  • The suite must be self-contained with its own entrance.
  • Property taxes and heat must be factored into the borrower’s debt ratios (which is currently not the case when using rent from legal secondary suites).
  • For existing units, there must be two-year history of rental income from the suite. The maximum rental income allowed for qualification is a two-year average of the unit’s rent.
  • For new units, a market rent appraisal can be accepted if an appropriate vacancy rate has been applied to the estimated rental income.
  • Mortgage applicants must “demonstrate a strong history of managing credit” with a minimum credit score of 680.

 

On 3-4 unit owner-occupied properties and 1-4 unit non-owner occupied rentals, CMHC will be allowing a net rents calculation (i.e., gross rents less operating expenses).
 
Note that individual lender guidelines may very well be tighter than what you see above.
 
Genworth and Canada Guaranty have had a 100% add-back policy for a while (for basement suites), but mainly in Victoria and Vancouver. CMHC’s new policy extends nationwide. Both private insurers say they’re reviewing CMHC’s changes and haven’t decided if they’ll match this guideline. We’ll bet that one or both of them will.
 
“In the big picture, I do not see that this will have a significant impact on the overall housing market,” says Kinch. “But in certain suburban areas, this shift in CMHC policy will help speed up a trend that is already taking place, and that is the widening price-gap between single-family and multi-family (condo, townhome) homes.”
 
Another broker, who didn’t want to be named, said the move could encourage more people to lie about owner-occupying a property (i.e., say they’re living in one unit but renting out both units). That minor unavoidable side effect aside, CMHC deserves applause for trying to boost the stock of affordable rentals and allowing young homebuyers an alternative to condo living.
 
Source: CanadianMortgagetrends.com