Sep
26

Finally! See How Bad You (May) Be Ripped Off By Big Banks

A little while ago the Finance Minister announced a great change in mortgage penalty disclosure by enforcing that all big banks must post their penalty calculators on their websites by November 1st. Lucky for us the great majority of them got to it quicker than that and have begun posting their calculators on their site now, which offers full transparency to potential buyers (and refinancers, renewers, switchers etc) as to how their penalties will be calculated should they have to break their mortgages.

The banks that have done this so far are:

BMO

CIBC

ING

Laurentian Bank/B2B Bank

National Bank

Royal Bank of Canada

Scotiabank

TD Bank

And, although not required 2 mortgage lenders have also posted their calculators:

MCAP

and First National.

Scenario

So I decided to pretend to be a client and input the following scenario: I have $200,000 left on my mortgage left and 2 years left before my term is up. My current rate is 3.49% and I received a 1.75% discount off posted rates (this is crucial because some of these calculators force you to look up how much discount you received off of posted rate). You’ll note that the penalties will vary widely because each lender uses a different formula for calculating this, some to your advantage while others not so much.

In order of penalty calculator links:

1. Bank of Montreal is asking for a whopping $7560 to break the mortgage.

2. CIBC wants $7843 of your money to leave them.

3. ING Direct wants a paltry $1664.

4. B2B Bank / Laurentian Bank will take $7055 of your cash and not cry about…

Sep
20

2010 vs 2012

2010 vs 2012: Changes

The other day I was discussing a potential purchase for first-time buyers of mine (and close friends). He works full-time earning $75,000 as a unionized specialist, and she is a stay-at-home-mom due in large part to the costs of child care. Together they have 2 cars both financed at $350 per month, and have scraped together $30,000 in savings in over a year, pretty good considering they are renting in a super hot market and paying $2000/m with 2 kids in a 2 bedroom 1 level apartment. Both credits are crystal clean and they also managed to pay off a large chunk of their unsecured debt leaving them with only about $5000 out of $30,000 they spent on their wedding. Kudos to these smart and savvy buyers!

Where’s the “BUT”? Well, here it is. But, even though they have managed to do all the above guess what – it’s still incredibly difficult for them to afford a home in Toronto, specifically the areas that are important to them.

In 2010, rates were approximately 3.5% on a 5-year fixed. Amortization available was 35-years, so in this case the maximum they could qualify for was $500,000 with $30K down.

In 2012, rate went down by half a point to 3.09%, but amortization fell by 10 years to 25 years maximum, so now they can qualify for $440,000 with $30K down.

$60,000 difference may not seem like a lot, and a lot of readers may scoff at the idea that they can afford that much (and shouldn’t be taking on this much debt). Due to extenuating circumstances they can only live within a certain radius of a medical centre so they must keep their house hunt in that area. That $60K difference in qualifying at a lower rate is…

Sep
10

How To Get Approved Fast(er)

Turnaround times are a hot topic these days with mortgage financing as lenders are increasingly tightening up their lending standards since the new mortgage rules came into effect.  When I submit an application I expect to receive at least an answer or follow-up questions within 4 hours. On the weekend a Realtor called to tell me his client’s current bank said to expect a 5-7 DAY turnaround time which I felt was completely unreasonable. So I got to thinking: how can you the client improve your turnaround time from the start? It’s easy - here’s how:

1. Get pre-approved. Make sure the pre-approval has all the required information and the information is accurate. Down payment source? Income? Using additional overtime income? First-time buyer? Previously with CMHC? The pre-approval time is best to get as much information down to the lender as possible so that the approval is done fast.

2. When you find a home and you either removed your financing condition or cut it down, even before you make the offer get as much ready as possible. Depending on the situation the basics will be an employment letter, paystub, void cheque, photo ID, and 90-days banking history from the various accounts where the down payment is coming from. That coupled with great credit means we can submit the file through the underwriting system AND simultaneously email our lenders with whatever information we have up-front to make the decision-making process that much easier for the lender. It also helps me do my job without having to go back-and-forth between lender and client in case there are some questions the lender may have.

If you do #1 and #2 in a timely manner, something as stressful as financing can be done relatively quickly. MUCH quicker than the 5-7 days my (now)…

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