Mar
25

Government of Canada Mortgage Calculator is fantastic!

I stumbled upon this mortgage calculator from the Office of Consumer Affairs website the other day, and much to my surprise it’s quite handy. I wish the url wasn’t so complicated (http://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/ca01817.html) (The Government of Canada could use a re-branding, don’t you think?) but the content and application is great.

Many clients have asked me whether they think it’s a good time to break their high-interest mortgage to go elsewhere. Using this calculator, it’s as easy as 1, 2, 3 to figure that out. Of course we can figure it out the long way just to double-check the numbers, something I prefer to do anyways.

One word of caution is inputting the “penalty amount”. Make sure when you do so, your penalty amount is up-to-date. Reason being is with the recent changes in rates, if you were quoted a certain $ figure, that may have gone up with a drop in rates. It is my hope that by the end of this year, the Finance Department will have standardized all Interest Rate Differential penalties across all lenders.

Mar
21

7 year mortgage (itch)

It’s nice to be quoted in the Globe and Mail by one of Canada’s finest finance journalists, Rob Carrick. As someone who works with first-time buyers, I said to him:

“I think it would be a good idea if someone taking a fixed [mortgage] would extend for longer,” he wrote. “Problem is, most of my first-time buyers don’t see themselves in their places for seven years. The great majority, being between 25 to 40 years old, want to keep moving up the property ladder.”

The context was whether the 7- or even 10-year mortgages are good value. Looking back, they are. Looking forward, perhaps not as much. What I mean by this is that 2 or 3 years ago, a 7-year mortgage priced at the same cost as a 5-year rate then seemed like good money. However we have become somewhat spoiled with low mortgage rates, and the on-going influx of world events could potentially keep our rates lower and lower going forward. As a result I have not ever sold one mortgage term more than 5 years long, ever. Who exactly ever wants to be committed for such a long time to a mortgage?

The ideal long-term mortgagee would be:

  • someone who is not looking to move from their home for at least that time
  • someone who is very rate-sensitive but afraid that we have hit our valley with long-term rates
  • someone whose income is rather fixed and won’t rise much over the term but who is under their GDS/TDS* guidelines
  • Is this you? if so, contact me today to get a sensational long-term rate without any worry as to where rates are headed for close to a decade.

    *GDS RATIO (Gross Debt Service Ratio):

    Mar
    17

    Spring Cleaning!

    The CMHC website has a wonderful list of “spring cleaning” and maintenance.

    Let me warn you, it’s pretty exhaustive. Who ever said being an owner of a house was easy?

    Spring Maintenance Schedule
    After consulting your hot water tank owner’s manual, carefully test the temperature and pressure relief valve to ensure it is not stuck. Caution: This test may release hot water that can cause burns.

    Check and clean or replace furnace air filters each month during the heating season. Ventilation system, such as heat recovery ventilator, filters should be checked every two months.

    Have fireplace or wood stove and chimney cleaned and serviced as needed.

    Shut down, drain and clean furnace humidifier, and close the furnace humidifier damper on units with central air conditioning.

    Switch on power to air conditioning and check system. Have it serviced every two or three years.

    Clean or replace air-conditioning filter, if applicable.

    Check dehumidifier and drain — clean if necessary.

    Turn OFF gas furnace and fireplace pilot lights where possible.

    Have well water tested for quality. It is recommended that you test for bacteria every six months.

    Check smoke, carbon monoxide and security alarms, and replace batteries.

    Clean windows, screens and hardware, and replace storm windows with screens. Check screens first and repair or replace if needed.

    Open valve to outside hose connection after all danger of frost has passed.

    Examine the foundation walls for cracks, leaks or signs of moisture, and repair as required.

    Ensure sump pump is operating properly before the spring thaw sets in. Ensure discharge pipe is connected and allows water to drain away from the foundation.

    Re-level any exterior steps or decks that moved as a result of frost or settling.

    Check for and seal off any holes in exterior cladding that…

    Mar
    11

    Why Rate Is Not Everything.

    I realize that this blog post may go against the general thinking of rate, rate, rate. I do not for one second discount the importance of a low mortgage rate, but want to emphasize something else: service.

    Yesterday I had a client who received prime-.60, and wasn’t too pleased about it, especially when considering there are some lenders offering prime-.75. On his mortgage of $225,000, that made a difference of $16.00. In an era where internet sites profess to offer the lowest rates, that bait-and-switch approach does not always work out best. This client in particular was self-employed, and showed a very low income. He also owned a big property and so the “stated” income I had to use was, to put it lightly, astronomical. But the deal got done, and he’s expanding his real estate portfolio.

    Where I’m going with this is, as important as rate is to some, rate and service should also matter to others. Yesterday, Street Capital announced they are being purchased. Street Capital is a relatively newcomer to the mortgage market in Canada, and within a half decade has set itself up for a purchase by an investing company.  Also this week, Desjardins Credit Union and Meridien Credit Union are joining forces to become an even bigger player in the Canadian Banking sector. What does this mean in relation to you? If you hold mortgages by any of these companies, what guarantees do you have that your mortgage will be renewed? What about servicing? Who will be taking over your file? Who do you contact? In some cases things may not change much, but when Scotiabank bought out Maple Trust, the service levels fell off drastically, from “boutique” lender who was easily accessible to behemoth lender who has 5 layers of departments to access a…

    Mar
    07

    One Scotiabank Article I Agree With

    Usually when I hear or read predictions of what will happen in the marketplace, I read them with some hesitation. Nobody can predict the future. This article in the National Post, however, got me thinking in how solid their argument is for what is expected to happen to interest rates in Canada. Prime Rate did not move (as was widely expected) this month, and rumours are that we’ll see slow increases starting in the summer. The Bank of Nova Scotia outlines 7 reasons why interest rates won’t move until at least the late Fall, if at all this year:

    1. A falling U.S. Dollar.
    2. Potential unrest in the Middle East and globally.
    3. Not much room for an economic misstep.
    4. Mortgage rules have changed.
    5. Upcoming federal elections.
    6. Federal Reserve won’t raise rates in the U.S.
    and
    7. Unknown inflation target.

    Here’s the article.

    I wanted to expand on #4, however. We only have a few days left before mortgage rule changes take effect. Essentially by doing this, the Government of Canada has raised interest rates by making it more expensive for new borrowers to carry property - by reducing the amortization to 30 years. It’s been argued by some that we shouldn’t have even 30-year amortization. That being said, a typical $300,000 mortgage will increase by about $115 now because of the shorter time frame, so the market is expected to cool its white-hot heels after this change. The Bank of Canada need not continue to raise rates because the Government is doing a mighty fine job in trying to control the market in the first place.

    What do I think? I think it’s best to take variable rate, but pay the mortgage as…

    Mar
    02

    Deadlines!

    I remember in high-school and University I would thrive with a deadline. Whether it came to essay writing (my forte), or exam studying, or assignments - when the pressure was on, I would perform. It seems the real estate market is doing the same now, with the “deadline” hanging over buyer’s heads of March 18th for maximum amortization. As top Realtor Steven Fudge of Bosley Real Estate writes in his blog:

    Apparently there are so many buyers trying to secure a property on or before March 18th they’re competing against one another and pushing values up. Good Grief! Who wants to overpay for the privilege of spreading their crazy mortgage debt over 35 years (instead of the impending reduced limit of 30 years)? Apparently a lot! Ugh!

    ..and I share this sentiment. I’ve said it before and I just repeated it to my client (a first-time buyer): If you can’t afford a $107 change in payment from 35- to 30-years, you’re not getting into the game for the right reasons, or at the right time. However, the psychology of buyers is quite different. Cash-flow driven buyers are seeking (and overpaying) for those properties before the deadline happens, driving up the hysteria.

    To re-cap: As of March 18th, you may be able to buy a property with 35-year amortization. In order to get this amortization, you must have an approval from the lender before this date.

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