Mortgage Information

Useful Information From Kamloops Mortgage Brokers

This article appeared on CBC News on May 28th, 2014

Scotiabank offers 5-year fixed mortgage at 2.97%, CBC News. Scotiabank has lowered its five-year mortgage rate to 2.97 per cent, beginning a new sally in the war to win business.

The rate, effective until June 7, is the lowest among the big banks for a fixed five-year rate.

Two weeks ago Investors Group unveiled a three-year variable rate of 1.99 per cent. Variable rates often are lower than fixed rates, as the consumer takes the chance that interest rates will rise and cause higher payments.

In 2012, a number of Canadian banks offered five-year mortgage rates below three per cent — something that earned them a stern rebuke at the time from then Finance Minister Jim Flaherty. The banks quickly dropped the offer.

Flaherty tightened the country’s mortgage insurance rules in July 2012, in a bid to curb the rapid growth of consumer debt and soaring house prices. Although the measures briefly cut down on the number of people applying for mortgages, Canada’s housing market remains hot.

However, current Finance Minister Joe Oliver issued a statement today saying he will continue to monitor the market.

“It’s a small drop and its not my intention to be involved. We continue to monitor it,” he said in the lobby of the House of Commons.

Oliver pointed to government actions from 2008 to 2012 to reduce consumer indebtedness and the government’s exposure to the housing market through CMHC.

In March, Bank of Montreal again offered a fixed five-year rate of 2.99 per cent, but Scotiabank’s 2.97 per cent is a shade lower.

There is fierce competition among the banks for mortgage business, considered a secure form of consumer loan.

This summer, Royal Bank will offer real estate agents $1,000 for referring five first-time homebuyers.

First-time buyers are particularly desirable because they need a large sum of money and are likely to become bank clients for life.

John Andrew, a real estate expert with Queen’s University, said it was likely that other banks would follow Scotiabank’s lead to keep in pace in a competitive market — especially given a lag in sales in the all-important spring market which was delayed by bad winter weather.

“There’s no question that the mortgage lenders are very concerned about this slow spring and are obviously trying to catalyze the market and it’s obviously even more competitive right now than it normally would be,” Andrew said.

“We’re looking at mortgage rates very, very, close to this level being predominant right into the fall, and then I think we’re going to see bond yields begin to creep up again and we’ll start to see some rates rising.”

This article appeared on CBC News and was posted May 13, 2014 by Pete Evans. Investors Group unveils 3-year mortgage at 1.99%, CBC News.

Canada’s mortgage market was shaken up with a mortgage rate below two per cent on Tuesday as Investors Group unveiled a three-year variable rate mortgage at 1.99 per cent.

The Winnipeg-based financial services firm posted the rate on its website Tuesday, offering a 36-month term at a variable rate 101 basis points below IG’s current prime rate of three per cent.

“It’s probably something we may see more of,” Toronto mortgage broker Marcus Tzaferis said. “They offer it up so they can cross-sell their investment products.”

The offer comes with strings attached — namely that you can’t break the mortgage for any fee during the three-year term, unless you sell your home. But the offer does come with the ability to double up monthly payments, or pay a 15 per cent lump sum once a year.

In real dollar terms, it could knock a lot of money off a mortgage payment, at least over the short term. A standard 25-year $500,000 mortgage at a five-year rate of 2.99 per cent works out to $2,364 a month. That mortgage under IG’s new terms would be $2,115 a month — savings of $249 monthly, at least for the first three years, and as long as the variable rate doesn’t increase.

Tzaferis speculates the company is willing to take a loss on the home loan temporarily in the hopes of making money elsewhere down the line.

“They get the opportunity to wrap you up and cross-sell their mutual funds and you’ll probably renew and pay an extra half a per cent for a five-year then,” he said.

Investors Group’s five-year posted rate is currently at 3.4 per cent, slightly higher than what the market-leading big banks are offering.

Tzaferis says he recalls seeing five-year variable rate mortgages below two per cent several years ago, but it’s believed this is the first such posted product since the recession that began in late 2008. Kelvin Mangaroo, president of mortgage comparison website RateSupermarket.ca, says it’s the lowest rates he has seen in his company’s six-year history.

“I think they were trying to break the psychological barrier of two per cent to generate some interest … ahead of the peak spring buying season,” Mangaroo said.

“Rates will go up over time, but it looks like it won’t be any time soon,” he said.

In 2012, a number of Canadian banks offered five-year mortgage rates below three per cent — something that earned them a stern rebuke at the time from then-finance minister Jim Flaherty. The banks quickly dropped the offer.

In March, Bank of Montreal again offered a five-year rate of 2.99 per cent, a deal that Flaherty’s successor Joe Oliver was much more silent about.

Oliver released a statement Tuesday following news of the rate, noting the government has moved repeatedly in recent years to tighten lending rules and keep a lid on consumer debt and the housing market, but offering no hint it has any pressing intervention plans.

“I will continue to monitor the market closely,” the statement read.

This article appeared on CBC.ca on April 26th, 2014.  CMHC to limit mortgage insurance product offerings Effective May 30, CMHC will stop offering mortgage insurance on second homes

CMHC Canadian Mortgage and Housing CorporationCanada Mortgage and Housing Corporation will no longer offer mortgage insurance on second homes, the crown corporation said on Friday.

It will also discontinue selling mortgage insurance to self-employed people without third-party income validation. The new limitations mean borrowers will also no longer be able to act as co-borrowers on other applications.

These changes, which will take effect on May 30, are part of the ongoing review of the mortgage loan insurance business. CMHC said self-employed Canadians can still qualify for insured financing with a validation of their income using traditional methods.

As well, the two products will still be available to those who submit requests prior to May 30, regardless of the closing date of the home purchase.

CMHC said these two products account for less than three per cent of its insured business volumes in units. “Given the limited use of these products, their discontinuation is not expected to have a material impact on the housing market,” CMHC said in its release.

The changes come as Canadian home buyers face an increase in mortgage insurance premiums.

In February, CMHC announced it would hike premiums for default insurance by an average of 15 per cent effective May 1. The increase would hit buyers who have a downpayment of less than 20 per cent.

Can You Really Afford that Mortgage? Know Your Real Life Ratio, The Globe and Mail. This article appeared in the Globe and Mail, was written by Rob Carrick on March 5th, 2014.

Mortgage Rules in Canada Affordability Someone ought to explain the facts of life to the nation’s bankers.

They’re handing out mortgages to people without any apparent understanding that today’s home-buying couple is tomorrow’s family of three or four. A lot happens to one’s ability to afford mortgage payments when kids come along, but you’d never know it by the way lenders qualify borrowers.

Never take a lender’s word for it that you can afford a house. Instead, try a new tool I’ve created called the Real Life Ratio.

Download the Real Life Ratio interactive spreadsheet here.

It’s designed to show how well you’ll be able to handle the basic monthly costs of home ownership, plus real life expenses such as cars, daycare and long-term home maintenance. Prospective home buyers should try it, and so should existing homeowners who want to see how well they’re handling their finances.

The Real Life Ratio is an expansion of a simple affordability measure I introduced last year called the Total Debt Service and Savings Ratio, or TDSS. The idea of creating something more comprehensive came to me after a Globe and Mail series on daycare was published last fall. We heard from many people about how hard it was to manage the cost of a mortgage in today’s expensive housing market, on top of daycare and other costs.

Use the Real Life Ratio and you’ll know what you’re getting into before you buy a house. You may decide you need to save a bigger down payment, buy a smaller house, live in a cheaper location or not buy at all.

Here are a few important things to know about the ratio:

1. Household take-home pay is used here: Other ratios use gross income, which is less relevant for practical financial planning.

2. This is not a budget: Only fixed costs are included here; food, clothing and other costs aren’t discretionary, but you decide how much to spend.

3. Costs for home maintenance and improvement are included: You won’t face these costs every year, but on a long-term basis they might average about 1 per cent of your home’s value annually; maybe less for brand new homes and more for older ones.

4. There’s a slot to include condo fees: Be sure to add any monthly utility costs that are not included in your condo fees.

5. Your local real estate market plays a big role: A liveable Real Life Ratio may be harder to achieve in big cities with roaring real estate markets.

Guidelines on how to interpret the ratio are provided. For optimum results, make a list of your monthly spending on food, transportation, entertainment and everything else not included in the ratio. Then, see whether your lifestyle is affordable. If your Real Life Ratio is 80, could you get by on 20 per cent of your take-home pay?

Keep in mind that your ratio will change – for the worse if you have kids in daycare and have a couple of cars, and for the better once your kids are out of daycare and you move into your prime earning years.

To ensure the Real Life Ratio reflects real life, I consulted four financial planners. Thanks to Rona Birenbaum, Barbara Garbens, Kurt Rosentreter and Renée Verret for some useful suggestions based in part on spending patterns of their own clients.

Download the Real Life Ratio interactive spreadsheet here.

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