Mortgage broker in Toronto, the best mortgage rates and more

How Does Bank Of Canada Set Its Monetary Policy?

Ever wondered how the Bank of Canada sets its monetary policy? I found this presentation to be an excellent read and hope you will also. The presentation was made by the Deputy Governor of the Bank of Canada to a British-Columbia Mortgage Brokers Association meeting. Click here to find it.

Perhaps most interesting to note is the second misconception that although the BoC’s main goal is to maintain a 2% inflation rate, if all else is going well then it does not mean that the BoC will not raise or lower rates. Because of the length of time to actually see any effects of a rate change (usually 2 years), and the effect of “headwinds and tailwinds”, the BoC needs to act quickly and aggressively to not only keep things in check but make sure they don’t spin out of control in the future.…

Financing an Assignment

Recently I had a client come to me who wished to purchase a condo as an “assignment”.I also met with Keith Graham of http://www.thetorontocondos.com and we discussed assignments in general. He told me about a new site that helped him out and is revolutionizing the assingment industry assignt-it.ca helping to bring buyers (assignees) and sellers (assignors) together. It got me thinking: why don’t I see more assignment deals nowadays? Probably because, as we discussed, the banks, the lawyers, and the general public does not really know how to finance an assignment let alone is kind of scared of them, period. I will hope to clear up some misconceptions in this posting, of how to finance an assignment.

Using my example but changing the names to protect the privacy of the buyers and sellers, here’s what happened. Billy Jean King bought a condominum unit in 2008 from the…

Bought a dump? Need to do renos? Don’t have the money?

I’ve got the answer for you. It’s a rarely-used but great program called “Purchase Plus Improvements”. Let me explain using a real-life case I just did for my clients.

Maddy and Miguel just bought a fixer-upper for $329,900. And when I say “fixer-upper” I do mean fixer-upper. However the bones of the house were solid and the home was very well maintained. Using CMHC’s “PPI” program, they could add up to 10% of the original sale price of the home in improvements, and finance the project right away. However, a major caveat is that the work has to be done via registered contractors AND it must all be paid up front as the lawyer holds back the 10% extra funds. One creative solution was to go to a major home renovation centre and put the project on a 6-month no payment financing plan.

So that’s what they did!

Here’s how…

Now Is The Time..

I’m not much of a pushy sales guy. If a client wants to go the opposite route of my advice, or heck even doesn’t want to work with me, then I don’t push and prod and force the issue. I also don’t prey on people’s fears when trying to sell my service to them. Lately there’s been lots of talk about an impending change in our real estate market, be it in the short- or mid-terms, and specifically regarding house prices, a topic seemingly on everybody’s mind these days. You can’t throw a rock and not hit someone talking about house prices. Internet forums and threads dedicated to house prices. Blogs and online tweets about? you guessed it, house prices. I won’t begin to pretend I’m an expert on our real estate market in the GTA because I don’t even believe the self-proclaimed experts are experts. If we knew, we’d…

You Think Your Bank Loves You?

I love being called into action when clients get turned down by their banks for no apparent or logical reason. Love it because I get the business, and I also show people that running to their branch is not always the best course of action. In case #1 a first-time buyer couple had an absolutely amazing credit history of 820+ on both their scores. Their down payment was 5%, but, they diligently saved another 5% in their account for “in case” emergencies (which is rare!). They both worked full-time and their “GDS/TDS” qualifying ratios were 10% under, which gave them lots of breathing room. Here’s where it got wierd: their bank pre-approved them for the special of 2.99% 4year fixed, BUT, at $340,000. Problem was my clients needed to be pre-approved for $5,000 more. So when they made an offer and sent it to the bank rep, they were told:

…

Guess What?

Mortgage rules didn’t change (for once).

Thankfully big Government (with a capital G) didn’t put its paws on the market this time, and will allow the market to determine its direction.

After reducing amortization from 40 to 35 to 30, essentially killing the business-for-self market, reducing refinancing from 95% to 90% to 85% valuation, mandating that qualifying for anything other than a 5-year rate is done at the 5-year posted, and killing the 0-down deals, the Government has decided NOT to do anything drastic like increase minimum down payment to 7% or 10%, and/or anything else.

I agree with most of the moves they already have made, I disagree with any further action.

So, on that note, let’s keep the market active and buoyant!

Jake

OTTAWA (Reuters) - Canada’s federal budget on Thursday did not include any measures to tighten mortgage rules further as a means of cooling down the…

Interesting Paragraph.

I found it interesting to read the following paragraph in an article titled “Mortgage War Combatants Losing Taste For Battle”:

BMO is trying to rebuild its market share in the mortgage market, after losing considerable business over the past few years. The bank is employing a strategy of low rates up front, hoping to attract customers who also want to move accounts, while hoping to make bigger margins off customers down the road when they refinance.

The reason why I bolded that part is simple: BMO is hoping to make more money off its customers when they refinance. We know that about 70% of first-time buyers do not make it to the end of their 5-year term (on average they break at the 3.5 year mark). We also know that BMO’s mortgage offer of 2.99% does not allow a client to shop their mortgage around as you can only exit…

What Do Low Rates Mean In Five Years?

Let’s take a look at what today’s ultra-low 5-year rates mean to your balance and payments upon renewal. Let’s face it: many of our purchasing decisions are driven by payments, then amount and rate (let alone terms). Nowadays we’ve enjoyed 2-3 years of consistently low rates which has not always been the case. You’d be surprised to find out that your payments will almost certainly rise after your renewal, if rates creep up back to normal levels.

Example 1:

$350,000 mortgage
5 year fixed 3.29%
30-year amortization
Monthly payments
Semi-annual compound interest
PAYMENT: $1526 per month.

Assuming that’s your scenario, in 5 years your balance would be $312, 671.00 at renewal time.
$312, 671 mortgage
5 year fixed 4.49%*
25 year amortization*
Monthly payments
Semi-annual compound interest
PAYMENT: $1728 per month

Pretty staggering, no? $200 more per month…

What May Curtail Housing Market?

Many have been wondering how and why our market has been so resilient. Time and time again you hear of a bear-market analyst predicting doom & gloom, a bank economist saying we’re overheated (and then dropping their rates to record levels), and many industry-watchers assessing that we’re headed for a downfall. Yet, nothing so far has meant we’re going to have a correction.

Until possibly today’s front-page headline “Ottawa Targets Mortgage Risk” from the Globe and Mail.

As I wrote not too long ago, CMHC is nearing its lending limit of $600B. What this essentially means is that government-backed mortgages (less than 20% down in most cases) may no longer be available. We also have Genworth and Canada Guaranty, but CMHC is the backbone of our mortgage market. (example: did you know that many lenders still go to CMHC even over 20% equity deals?). What…

What BMO can’t do for you.

There’s much ado about nothing, so it seems. BMO has relaunched its no-frills 2.99% mortgage rate on a 5-year term. Let me summarize what you CANNOT get from Bank of Montreal:

1. You cannot move out of this mortgage to another financial institution at all without selling your home.

2. You cannot double up your payments.

3. You cannot skip a payment.

4. You cannot get a line of credit attached to the mortgage, it must be separate.

5. You cannot pre-pay more than 10% towards the payment and 10% towards the principal per year.

6. Your interest-rate-differential penalty is one of highest in the business (more on that in a future blog post), so IF you ever sell, and go elsewhere, be prepared for a huge cost.

Any questions?