Effective April 19, 2010, Qualifying Interest Rates guidelines will change as follows:
Fixed Rate Mortgages of terms less than 5 years and all Variable Interest Rate Mortgages: Applications will be adjudicated based on the greater of the 5 Year Bank of Canada Benchmark Rate**, or the actual customer rate (inclusive of any customer discretion).
Fixed Rate Mortgages of terms 5 years or greater: Applications will be adjudicated based on the actual customer rate.
This change applies to both conventional and insured mortgages
**The Bank of Canada Benchmark Rate is defined as the Chartered Bank – Conventional Mortgage 5-year Mortgage rate, published by the Bank of Canada each Monday, and can be found at http://www.bankofcanada.ca/en/rates/interest-look.html
3 key changes associated with this announcement are:
1. Borrowers will need to be able to afford a five-year fixed rate mortgage, even if they choose a mortgage with a shorter duration.
2. Investors, who want to buy a home that they don't plan to live in, will have to make a minimum down payment of 20%.
3. Canadian home owners will only be able to withdraw 90% of the value of their homes in a refinancing, down from 95%.
Monday, April 19, 2010
Tuesday, April 13, 2010
Don't Lose Sleep Over Your Mortgage
Has the 'variable/fixed' debate -and the threat of rising interest rates - kept you awake at night lately? If so, you're not alone.
Approximately 33 per cent of homeowners have complained that they lost sleep due stress associated with their mortgage, according to a new BMO survey conducted by Harris-Decima.
The Harris/Decima online poll was conducted from February 16th to 22nd, 2010 and is based on a sample of 1,000 Canadians between the ages of 25-45 years, who are either current home owners (who currently have a mortgage on their home) or are planning on purchasing their first home in the next 12 months, and at least share in their household's financial decisions.
If you're thinking about buying a new home - or if you're thinking about renewing your mortgage - I can't stress enough how important it is to get preapproved. While rates are likely going to be rising over the next year, a preapproval allows you to lock into today's low rates for 120 days. If rates go down, you still benefit from the lower rate.
In terms of the fixed/variable debate, many experts predict Prime will rise to 1.25% by the end of the year, compared to 0.25% today. To determine whether you should lock in or not, it's important to do the math ahead of time and determine how much of an influx you can comfortably withstand.
Remember that when you lock in, you're taking the rate of the current five-year fixed mortgage, so it's best to keep an eye on those as well if you're getting close to your threshold.
Variable rates increase in accordance with the Bank of Canada's prescheduled Prime rate announcements - so a hike isn't going to come out of the blue. Fixed rates, however, fluctuate with the bond market which is much less predictable.
Don't lose sleep over this. Instead, give me a call. I can assist you with a preapproval or analyze your financial situation and help you make the decision that is right for your specific needs.
Approximately 33 per cent of homeowners have complained that they lost sleep due stress associated with their mortgage, according to a new BMO survey conducted by Harris-Decima.
The Harris/Decima online poll was conducted from February 16th to 22nd, 2010 and is based on a sample of 1,000 Canadians between the ages of 25-45 years, who are either current home owners (who currently have a mortgage on their home) or are planning on purchasing their first home in the next 12 months, and at least share in their household's financial decisions.
If you're thinking about buying a new home - or if you're thinking about renewing your mortgage - I can't stress enough how important it is to get preapproved. While rates are likely going to be rising over the next year, a preapproval allows you to lock into today's low rates for 120 days. If rates go down, you still benefit from the lower rate.
In terms of the fixed/variable debate, many experts predict Prime will rise to 1.25% by the end of the year, compared to 0.25% today. To determine whether you should lock in or not, it's important to do the math ahead of time and determine how much of an influx you can comfortably withstand.
Remember that when you lock in, you're taking the rate of the current five-year fixed mortgage, so it's best to keep an eye on those as well if you're getting close to your threshold.
Variable rates increase in accordance with the Bank of Canada's prescheduled Prime rate announcements - so a hike isn't going to come out of the blue. Fixed rates, however, fluctuate with the bond market which is much less predictable.
Don't lose sleep over this. Instead, give me a call. I can assist you with a preapproval or analyze your financial situation and help you make the decision that is right for your specific needs.
Tuesday, April 6, 2010
Monday, April 5, 2010
What to do about the rise in rates
There's been a lot written in the media lately about upcoming hikes in fixed rates. While it's true many of the big banks have increased their posted fixed rates, if a new mortgage is on your horizon, there's no need to panic.
As of right now, there are still many lenders who are offering rates near historic lows. If you're thinking about buying or renewing in the near future, your best bet is to take advantage of a 120 day rate hold. This feature, offered by many different lenders, allows you to get prequalified at today's low interest rate. If rates go up, you're guaranteed today's rate. If they go down, you get the lower rate.
When it comes to locking in your variable rate mortgage, that question is a little trickier to answer. Many experts believe the Bank of Canada will start increasing its Prime rate in the near future by approximately 25 basis points. If you're in a financial situation where an increase in monthly payments is going to be tough for you to handle, it's probably wise to lock in now. When you lock in, it's important to remember that you're locking into the current fixed rates.
If you can withstand small increases in your mortgage rate, you might want to stand pat with your variable rate mortgage for now. Increases don't come out of the blue – since they're tied to the Bank of Canada's prescheduled announcements – so it's best to tackle as much principle as possible while you can afford it.
Whatever you choose to do, take note that lenders are particularly swamped right now as homeowners try to acquire a rate lock - or a mortgage – before rates really start to increase. If you're buying a home, make sure you give yourself at least seven days to acquire financing.
If you would like advice on the options that make the most sense for your particular situation, please feel free to give me a call.
As of right now, there are still many lenders who are offering rates near historic lows. If you're thinking about buying or renewing in the near future, your best bet is to take advantage of a 120 day rate hold. This feature, offered by many different lenders, allows you to get prequalified at today's low interest rate. If rates go up, you're guaranteed today's rate. If they go down, you get the lower rate.
When it comes to locking in your variable rate mortgage, that question is a little trickier to answer. Many experts believe the Bank of Canada will start increasing its Prime rate in the near future by approximately 25 basis points. If you're in a financial situation where an increase in monthly payments is going to be tough for you to handle, it's probably wise to lock in now. When you lock in, it's important to remember that you're locking into the current fixed rates.
If you can withstand small increases in your mortgage rate, you might want to stand pat with your variable rate mortgage for now. Increases don't come out of the blue – since they're tied to the Bank of Canada's prescheduled announcements – so it's best to tackle as much principle as possible while you can afford it.
Whatever you choose to do, take note that lenders are particularly swamped right now as homeowners try to acquire a rate lock - or a mortgage – before rates really start to increase. If you're buying a home, make sure you give yourself at least seven days to acquire financing.
If you would like advice on the options that make the most sense for your particular situation, please feel free to give me a call.
Thursday, March 25, 2010
Are you Doing All You Can to Protect Yourself Against Fraud?
In honour of fraud prevention month, TD Canada Trust released this quiz to help consumers identify their level of fraud savvy. Each right answer receives 2 points – the correct answers are located at the bottom of the quiz.
1. What does a criminal need to make a copy of your card and access your account?
a) The card -- my Personal Identification Number (PIN) is on the stripe
b) My PIN -- they can use a blank card
c) The card and my PIN together
2. A customer's PIN is located on the magnetic strip on their card
a) True
b) False
3. How often should you cover the key pad when you enter your PIN?
a) Always
b) Sometimes
c) Never
4. What is Phishing?
a) Looking over someone's shoulder at an ABM to learn their PIN
b) A scam done over the phone or via email to obtain personal and financial information
c) Rifling through the garbage to look for discarded receipts and statements
5. A salesperson asks you for your PIN, saying their new keypad doesn't stretch that far and they have to enter it themselves. You:
a) Give them your PIN and debit card
b) Decline to give them your PIN but continue your transaction and move around the counter to enter your PIN yourself
c) Leave and contact your financial institution
6. How often should you check your banking and credit card statements for discrepancies?
a) Always
b) Often
c) Never
7. You do your banking online, so when you receive your statement in the mail you should:
a) Throw it away without opening it
b) Read it and put it in the recycling
c) Read it and shred it
8. How secure should you be with your debit and credit cards?
a) Fairly secure - don't loan them to strangers but it's OK if family and friends borrow them
b) Don't sweat it. If someone steals them you will be reimbursed
c) Treat them like cash and know where they are at all times
9. You go to pay for lunch and your credit card is gone. What should you do?
a) Call your credit card company immediately to report it lost
b) Dine and dash
c) Drop by your bank branch a few days later to report it missing
10. What should you do if you receive an email from your financial institution asking for your banking information?
a) Enter the information
b) Delete it because your financial institution would never ask for your banking information via email
c) Contact the email sender to find out more
11. What should you do with expired identification and credit cards?
a) Throw them away
b) Save them because you like the way you look in the photo
c) Shred them
12. You sell something online to a stranger who sends you a check for too much and asks you to wire the difference. You should:
a) Do as they ask because you trust the selling site
b) Do as they ask because if the cheque's no good your bank will reimburse you
c) Cancel the transaction and rip up the cheque
The answers
Give yourself 2 points for every right answer: 1.c) 2.b) 3.a) 4.b) 5.c) 6.a) 7.c) 8.c) 9.a) 10.b) 11.c) 12.c)
Where you stand
If you scored 20-24: You run a tight ship - your information is pretty safe
• You have a place for everything and everything is in its place so you know almost instantly if something is missing or not right. Now, while you may not apply this strategy to every aspect of your life (we know about your junk drawer), you know that your debit and credit card is safest with you and you know how to keep them from getting into the wrong hands.
• Not only do you shield your PIN during the transaction but you take your transaction record and destroy it when you no longer need it. Remember to do the same with any expired identification or personal papers you no longer need.
• You probably don't have much to worry about since fraudsters tend to pick on easy targets. You are very careful and aware of how to protect yourself, so keep up the good behaviour.
If you scored 14-18: You know the basics, but there is more you can do to protect yourself
• Take extra precautions to protect your personal information. Maybe you don't share your PIN with anyone - but are you sure your PIN is a number that would be hard to guess? Avoid using your birthday or part of your phone number.
• Since e-mail isn't always secure, you know better than to send private information, like your credit card number, this way - but remember, not all websites are secure either.
• Make sure you are shopping on a secure website or look for merchants who use added security features, like Verified by Visa, before entering your credit card information.
• Also, shred your personal information. There is only one of you, let's keep it that way.
If you scored under 14: Be careful - you're sharing too much!
• Take the time to protect what is important - your identity, your money and yourself. Don't be so carefree with personal information. Never lend your cards to anyone, or give anyone your PIN. Even better, memorize your PIN so you don't need to write it down. And, never carry your PIN with your wallet.
• Unless you initiated the call, do not provide your credit card number over the phone.
• Though email is a convenient way to contact someone, your financial institution will never ask you to verify your banking information that way. And remember, that king from a far off land asking you to share your bank account information is not actually going to make you rich.
1. What does a criminal need to make a copy of your card and access your account?
a) The card -- my Personal Identification Number (PIN) is on the stripe
b) My PIN -- they can use a blank card
c) The card and my PIN together
2. A customer's PIN is located on the magnetic strip on their card
a) True
b) False
3. How often should you cover the key pad when you enter your PIN?
a) Always
b) Sometimes
c) Never
4. What is Phishing?
a) Looking over someone's shoulder at an ABM to learn their PIN
b) A scam done over the phone or via email to obtain personal and financial information
c) Rifling through the garbage to look for discarded receipts and statements
5. A salesperson asks you for your PIN, saying their new keypad doesn't stretch that far and they have to enter it themselves. You:
a) Give them your PIN and debit card
b) Decline to give them your PIN but continue your transaction and move around the counter to enter your PIN yourself
c) Leave and contact your financial institution
6. How often should you check your banking and credit card statements for discrepancies?
a) Always
b) Often
c) Never
7. You do your banking online, so when you receive your statement in the mail you should:
a) Throw it away without opening it
b) Read it and put it in the recycling
c) Read it and shred it
8. How secure should you be with your debit and credit cards?
a) Fairly secure - don't loan them to strangers but it's OK if family and friends borrow them
b) Don't sweat it. If someone steals them you will be reimbursed
c) Treat them like cash and know where they are at all times
9. You go to pay for lunch and your credit card is gone. What should you do?
a) Call your credit card company immediately to report it lost
b) Dine and dash
c) Drop by your bank branch a few days later to report it missing
10. What should you do if you receive an email from your financial institution asking for your banking information?
a) Enter the information
b) Delete it because your financial institution would never ask for your banking information via email
c) Contact the email sender to find out more
11. What should you do with expired identification and credit cards?
a) Throw them away
b) Save them because you like the way you look in the photo
c) Shred them
12. You sell something online to a stranger who sends you a check for too much and asks you to wire the difference. You should:
a) Do as they ask because you trust the selling site
b) Do as they ask because if the cheque's no good your bank will reimburse you
c) Cancel the transaction and rip up the cheque
The answers
Give yourself 2 points for every right answer: 1.c) 2.b) 3.a) 4.b) 5.c) 6.a) 7.c) 8.c) 9.a) 10.b) 11.c) 12.c)
Where you stand
If you scored 20-24: You run a tight ship - your information is pretty safe
• You have a place for everything and everything is in its place so you know almost instantly if something is missing or not right. Now, while you may not apply this strategy to every aspect of your life (we know about your junk drawer), you know that your debit and credit card is safest with you and you know how to keep them from getting into the wrong hands.
• Not only do you shield your PIN during the transaction but you take your transaction record and destroy it when you no longer need it. Remember to do the same with any expired identification or personal papers you no longer need.
• You probably don't have much to worry about since fraudsters tend to pick on easy targets. You are very careful and aware of how to protect yourself, so keep up the good behaviour.
If you scored 14-18: You know the basics, but there is more you can do to protect yourself
• Take extra precautions to protect your personal information. Maybe you don't share your PIN with anyone - but are you sure your PIN is a number that would be hard to guess? Avoid using your birthday or part of your phone number.
• Since e-mail isn't always secure, you know better than to send private information, like your credit card number, this way - but remember, not all websites are secure either.
• Make sure you are shopping on a secure website or look for merchants who use added security features, like Verified by Visa, before entering your credit card information.
• Also, shred your personal information. There is only one of you, let's keep it that way.
If you scored under 14: Be careful - you're sharing too much!
• Take the time to protect what is important - your identity, your money and yourself. Don't be so carefree with personal information. Never lend your cards to anyone, or give anyone your PIN. Even better, memorize your PIN so you don't need to write it down. And, never carry your PIN with your wallet.
• Unless you initiated the call, do not provide your credit card number over the phone.
• Though email is a convenient way to contact someone, your financial institution will never ask you to verify your banking information that way. And remember, that king from a far off land asking you to share your bank account information is not actually going to make you rich.
Monday, March 22, 2010
Signs the market might (finally) be slowing?
The fact the Federal government’s new mortgage rules aren’t scheduled to kick in until April 19 hasn’t stopped housing markets across the country from showing signs of cooling.
As more lenders implement the rules early – and thus decrease affordability – and more homeowners put their houses on the market, it looks like the supply/demand curve might finally be balancing out.
Below are a few supporting numbers, as per the Canadian Real Estate Association’s numbers:
1.5% - the month-over-month drop in existing home sales from January to February, 2010. This follows a 3.8% decrease reported in January.
2.4% - The amount that new housing listings grew in that same period, marking the fifth straight month of increased housing supply.
5.2 months – The amount of housing inventory in February, well below the 8.8 months of February 2009, but on par with 2008 levels.
$335,655 – The average price of all homes sold in February – up 18.2% from a year earlier. Keep in mind, however, that the housing market was still in a slump for the first quarter of 2009.
"Time will tell how normal the market becomes, but I think there are pretty clear signs that some self-correcting mechanisms are starting to take over and lead to a calmer market, compared to what we saw in late 2009," said Douglas Porter, deputy chief economist at BMO.
As more lenders implement the rules early – and thus decrease affordability – and more homeowners put their houses on the market, it looks like the supply/demand curve might finally be balancing out.
Below are a few supporting numbers, as per the Canadian Real Estate Association’s numbers:
1.5% - the month-over-month drop in existing home sales from January to February, 2010. This follows a 3.8% decrease reported in January.
2.4% - The amount that new housing listings grew in that same period, marking the fifth straight month of increased housing supply.
5.2 months – The amount of housing inventory in February, well below the 8.8 months of February 2009, but on par with 2008 levels.
$335,655 – The average price of all homes sold in February – up 18.2% from a year earlier. Keep in mind, however, that the housing market was still in a slump for the first quarter of 2009.
"Time will tell how normal the market becomes, but I think there are pretty clear signs that some self-correcting mechanisms are starting to take over and lead to a calmer market, compared to what we saw in late 2009," said Douglas Porter, deputy chief economist at BMO.
Friday, March 19, 2010
The Pre Approved Mortgage Myth
Once upon a time in a country far far away anyone who was planning on buying house went to great intuitions of commerce to discuss the possibility with a wise and sage guardian of funds. Armed with their pre-approval people went out a looked for a house and when they found the perfect home they returned to the sage guardian and were given the funds to close the transaction. There was a thing called loyalty and relationships and once established these bonds were tough to beat.
Then things got better, much better. As people have become more savvy about borrowing and are exploring more options the pre-approval is one of those services that has diminished over the years. Many years ago when I was working in the bank we would handle a pre-approval as if it were a true mortgage application. We would subject it to the same scrutiny as any other type of loan and collect all our documentation. Once a client bought a house all they had to do was have the realtor send us the completed offer and the MLS listing. The next thing the client had to do was pick the paint and show up at the lawyers.
Most lenders are not pre-pared to invest that amount of time in pre approvals anymore because so few of them actually close. Clients shop around and often take the pre-approval and negotiate something better. Basically today’s pre-approvals often don’t even include a credit check. They are a brief conversation and calculations are done without clarification of income or down payment. Clients are given ball-park numbers and their rate is help for up to 4 months. Even actual commitments mean little but I will save that for another article.
If you are seeking a pre-approved mortgage and planning on using as an absolute guide to purchase then heads up! You need to make sure you have in depth conversation with someone with complete knowledge of the industry. If you find yourself shopping around for a person who finally tells you what you want to hear then you may have a problem at closing. The rules for mortgages are very black and white and especially insured mortgages really level the playing field. Make sure the person you talk to takes a good look at your income documentation and your source of down-payment. It should be clear in your mind what you have to bring to the table in order to make the process as smooth as possible. If friends tell you stories about running around at the last minute to gather information to close their mortgages then you need to stay clear of those recommendations.
Even after a full investigative interview your pre-approval is no guarantee. The lender has still not nailed down the true cost of your transaction. For example if you are pre-approved to buy a house at $450,000 you come back with a condo for the same amount I can almost guarantee you the condo fees are not factored into your ability to borrow . If you got a pre-approval that holds the rate till after April 19th the new rules will apply to your application once you find the home you want. Experience is the key to success. There are lot of great mortgage products on the market that make homeownership attractive. It’s your job to make sure you are sitting in front of someone who really knows and understands the rules.
Then things got better, much better. As people have become more savvy about borrowing and are exploring more options the pre-approval is one of those services that has diminished over the years. Many years ago when I was working in the bank we would handle a pre-approval as if it were a true mortgage application. We would subject it to the same scrutiny as any other type of loan and collect all our documentation. Once a client bought a house all they had to do was have the realtor send us the completed offer and the MLS listing. The next thing the client had to do was pick the paint and show up at the lawyers.
Most lenders are not pre-pared to invest that amount of time in pre approvals anymore because so few of them actually close. Clients shop around and often take the pre-approval and negotiate something better. Basically today’s pre-approvals often don’t even include a credit check. They are a brief conversation and calculations are done without clarification of income or down payment. Clients are given ball-park numbers and their rate is help for up to 4 months. Even actual commitments mean little but I will save that for another article.
If you are seeking a pre-approved mortgage and planning on using as an absolute guide to purchase then heads up! You need to make sure you have in depth conversation with someone with complete knowledge of the industry. If you find yourself shopping around for a person who finally tells you what you want to hear then you may have a problem at closing. The rules for mortgages are very black and white and especially insured mortgages really level the playing field. Make sure the person you talk to takes a good look at your income documentation and your source of down-payment. It should be clear in your mind what you have to bring to the table in order to make the process as smooth as possible. If friends tell you stories about running around at the last minute to gather information to close their mortgages then you need to stay clear of those recommendations.
Even after a full investigative interview your pre-approval is no guarantee. The lender has still not nailed down the true cost of your transaction. For example if you are pre-approved to buy a house at $450,000 you come back with a condo for the same amount I can almost guarantee you the condo fees are not factored into your ability to borrow . If you got a pre-approval that holds the rate till after April 19th the new rules will apply to your application once you find the home you want. Experience is the key to success. There are lot of great mortgage products on the market that make homeownership attractive. It’s your job to make sure you are sitting in front of someone who really knows and understands the rules.
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