If Canada's five chartered banks were the only institutions allowed to lend money in the form of mortgages in this country, rates would be sky-high, and the selection of mortgage products would be rather slim. Thankfully, we have non-bank lenders to keep the Big Banks on their toes.
While these lenders may not invest the same number of dollars in fancy advertising campaigns, they're nevertheless an excellent option for savvy consumers who are looking for a good mortgage deal.
Because non-bank lenders don't have to support the overhead costs of brick-and-mortar branches, and instead opt to go through the mortgage broker channel, they're able to offer better rates. In addition, because they're seeking to steal market share from the dominating big banks, they're much more likely to offer unique mortgage features - such as better prepayment options, flexible payment frequencies, and unique products such as cash-back mortgages - while at the same time offering a little more flexibility when it comes to clients with lower credit scores, or those that are self-employed or commission-based.
While non-bank lenders aren't considered "banks" in the traditional sense, they're still required to follow all the same regulations and underwriting guidelines as their bank counterparts. They also have access to the same default insurance options as the big banks - whether that's through CMHC, Genworth, or United Guaranty.
Not all non-bank lenders are "sub-prime" (in fact, there are very few of these lenders left in Canada), and while it's true that many of them are foreign-owned, there are many homegrown institutions here as well. Their models have seen success across the globe, and continue to thrive here in Canada.
If you're in the market for a new mortgage or a renewal, I invite you to head into your local bank branch to see what type of deal it can offer you. Then pop by my office and I'll scour the rest of the country's lenders - and likely save you a few percentage points off your mortgage.
Tuesday, June 22, 2010
Tuesday, June 15, 2010
Mortgage Misinformation
Ever since the Federal government announced a new set of mortgage rules in February, misinformation has been spreading like wildfire. Don't buy the hype - acquiring a mortgage is still possible!
Below are a few mortgage myths, debunked:
1. You can still purchase a property with 5% down.
While the government did change the rules regarding 5% down payments, the changes only affected property investors. If you're a first-time buyer - or if you're looking to move into another residence that you plan to occupy - you can still buy a home for 5% down. You can even buy a home with rental units in it for 5% down, as long as you plan to live there too.
2. You can still purchase a vacation or second property with 5% down.
If you have your eye on a new cottage or second home, those are also exempt from the new down payment changes. Unless you plan to rent it out when you're not living there, you can still purchase a second home for 5% down. The only situation that falls under the new rules - where you'll be required to put 20% down - is if you're purchasing a property solely for investment purposes. This is to prevent real estate speculators from artificially inflating the market.
3. You can still qualify for a mortgage.
While the government did implement a rule to reign in over-zealous first-time buyers, the intention was noble. To prevent first-time buyers from getting in over their heads, the government is now making it mandatory for lenders to qualify them on the five-year fixed rate - even if they're choosing a lower variable-rate mortgage. This is because, while variable rate mortgages may initially seem lower, they change according to the Bank of Canada's Prime lending rate - and in the coming year or two, the government has made it quite clear that this rate is going to increase. By qualifying borrowers at the higher rate, lenders are ensuring homebuyers can withstand the increases.
Below are a few mortgage myths, debunked:
1. You can still purchase a property with 5% down.
While the government did change the rules regarding 5% down payments, the changes only affected property investors. If you're a first-time buyer - or if you're looking to move into another residence that you plan to occupy - you can still buy a home for 5% down. You can even buy a home with rental units in it for 5% down, as long as you plan to live there too.
2. You can still purchase a vacation or second property with 5% down.
If you have your eye on a new cottage or second home, those are also exempt from the new down payment changes. Unless you plan to rent it out when you're not living there, you can still purchase a second home for 5% down. The only situation that falls under the new rules - where you'll be required to put 20% down - is if you're purchasing a property solely for investment purposes. This is to prevent real estate speculators from artificially inflating the market.
3. You can still qualify for a mortgage.
While the government did implement a rule to reign in over-zealous first-time buyers, the intention was noble. To prevent first-time buyers from getting in over their heads, the government is now making it mandatory for lenders to qualify them on the five-year fixed rate - even if they're choosing a lower variable-rate mortgage. This is because, while variable rate mortgages may initially seem lower, they change according to the Bank of Canada's Prime lending rate - and in the coming year or two, the government has made it quite clear that this rate is going to increase. By qualifying borrowers at the higher rate, lenders are ensuring homebuyers can withstand the increases.
Tuesday, June 8, 2010
Home overvalued? Local rental rates will tell
The topic of real estate overvaluation has been a hot one over the past week - pretty much ever since the big banks tweaked their real estate forecasts.
CIBC is the most recent bank to sing a different tune when it comes to real estate appreciation across the country, arguing that approximately 17% of homes are overvalued, and Canadians can expect a 5-10% price drop in the coming year or two.
Real estate markets across the country have been hot for over a decade, so this concept of overvaluation makes sense. To see if your home is one that 17%, you may want to employ a tool from the stock market.
When analyzing stock, investors look at its price-to-earnings ratio, which is a comparison of a company's share price with its annual profit. The higher the ratio, the more expensive a stock is relative to its underlying value.
Houses are similar in this regard - but instead of earnings, you have to look at the going rental rate in the area. Take the rental rate, multiply it by 12 (to get the annual cost) and divide your home's going price by that number. If you get a number that's higher than 20, your house is overvalued.
As an example, we employed this method to apply to a one-bedroom condo across three cities. To find the going purchase price, we visited www.mls.ca. To find the going rental rate, we visited www.craigslist.org. Where possible, we tried to find units in the same building or at least the same street. Keep in mind that just because one of the examples is overvalued doesn't mean every home in that city is. Prices can be escalating in a certain area of a certain city, but as long as rents are keeping up with them, chances are they're not overvalued.
Example 1: Toronto
Purchase Price: $325,000
Rental Rate: $1500/mo (x 12 = 18,000/yr)
Ratio: 18.05
Example 2: Edmonton
Purchase Price: $204,500
Rental Rate: $800
Ratio: 21.3
Example 3: Vancouver
Purchase Price: $369,800
Rental Rate: $1175/mo
Ratio: 26.22
CIBC is the most recent bank to sing a different tune when it comes to real estate appreciation across the country, arguing that approximately 17% of homes are overvalued, and Canadians can expect a 5-10% price drop in the coming year or two.
Real estate markets across the country have been hot for over a decade, so this concept of overvaluation makes sense. To see if your home is one that 17%, you may want to employ a tool from the stock market.
When analyzing stock, investors look at its price-to-earnings ratio, which is a comparison of a company's share price with its annual profit. The higher the ratio, the more expensive a stock is relative to its underlying value.
Houses are similar in this regard - but instead of earnings, you have to look at the going rental rate in the area. Take the rental rate, multiply it by 12 (to get the annual cost) and divide your home's going price by that number. If you get a number that's higher than 20, your house is overvalued.
As an example, we employed this method to apply to a one-bedroom condo across three cities. To find the going purchase price, we visited www.mls.ca. To find the going rental rate, we visited www.craigslist.org. Where possible, we tried to find units in the same building or at least the same street. Keep in mind that just because one of the examples is overvalued doesn't mean every home in that city is. Prices can be escalating in a certain area of a certain city, but as long as rents are keeping up with them, chances are they're not overvalued.
Example 1: Toronto
Purchase Price: $325,000
Rental Rate: $1500/mo (x 12 = 18,000/yr)
Ratio: 18.05
Example 2: Edmonton
Purchase Price: $204,500
Rental Rate: $800
Ratio: 21.3
Example 3: Vancouver
Purchase Price: $369,800
Rental Rate: $1175/mo
Ratio: 26.22
Friday, May 28, 2010
Casting call for a new show "Mortgage Free"
Hello, it's me again bugging to you spread the word for another casting call. This time I'm looking for people who are planning on selling their homes and buying something they like just as nice but less expensive so you can live "Mortgage Free". There is a big cash incentive for anyone who is in the market. I have a tight time-line here and need to hear back from you asap! Here's the details....
Are you planning MORTGAGE FREE
Tired of merely dreaming of becoming MORTGAGE FREE? Let us help you make it a reality. Mortgage Free is a new HGTV real estate series in which the ultimate goal is to sell each homeowner’s property, and with the available equity, buy another home (that the homeowner loves!) outright.
The REALTOR HOST determines the approximate value of the current home and then subtracts the remainder of the mortgage plus the projected realtor fees, moving costs, penalties and closing costs to be paid. The money left over is the ‘mortgage free’ shopping budget. The Realtor host will then offer the homeowner properties from which the participants choose, based on their wish list.
Presented with property options, our participants will pick one to purchase. With the REALTOR HOST, they will weigh the pros and cons of each property, until they make the decision of which to purchase. Once a selected property has been purchased, they are…Mortgage Free!
Looking to downsize? To move from the city to the country? House to condo? Whatever your dream is, we want to hear it!
Candidates Must:
-Have outgoing & personable families - 30’s to early 50’s
-Live between Burlington east to Bowmanville
-Have at least $300,000 equity in their existing homes
Now, as if living mortgage free isn’t enough in and of itself – you will receive $10,000 if you sell, buy and become mortgage free! You will receive $4,000 if you decide in the end to stay where you are, and not live mortgage free.
Please email Jen Mitchell at smsconcepts.jen@gmail.com to apply!
Are you planning MORTGAGE FREE
Tired of merely dreaming of becoming MORTGAGE FREE? Let us help you make it a reality. Mortgage Free is a new HGTV real estate series in which the ultimate goal is to sell each homeowner’s property, and with the available equity, buy another home (that the homeowner loves!) outright.
The REALTOR HOST determines the approximate value of the current home and then subtracts the remainder of the mortgage plus the projected realtor fees, moving costs, penalties and closing costs to be paid. The money left over is the ‘mortgage free’ shopping budget. The Realtor host will then offer the homeowner properties from which the participants choose, based on their wish list.
Presented with property options, our participants will pick one to purchase. With the REALTOR HOST, they will weigh the pros and cons of each property, until they make the decision of which to purchase. Once a selected property has been purchased, they are…Mortgage Free!
Looking to downsize? To move from the city to the country? House to condo? Whatever your dream is, we want to hear it!
Candidates Must:
-Have outgoing & personable families - 30’s to early 50’s
-Live between Burlington east to Bowmanville
-Have at least $300,000 equity in their existing homes
Now, as if living mortgage free isn’t enough in and of itself – you will receive $10,000 if you sell, buy and become mortgage free! You will receive $4,000 if you decide in the end to stay where you are, and not live mortgage free.
Please email Jen Mitchell at smsconcepts.jen@gmail.com to apply!
Thursday, May 20, 2010
Casting Call For A New Show.
I have one of the best jobs in the world and every once in a while it gets even better. I am looking for people who currently own a house or town house (sorry no apartment style condos) who want to take part in a new TV show called "House Poor".
I have listed some of the situations that might make you an ideal candidate. Please feel free to share this information with anyone you know who maybe interested and have them get in touch with me at mberg@mortgages4women.ca and I will pass your names along to the casting director.
* You put the entire down payment on credit
* You undertook major renovations that you couldn’t afford
* You consolidated consumer debt into the mortgage, over-extended on Home Equity lines of credit or took out a 2nd mortgage
* You didn’t budget for repairs and now you can’t afford to fix a home emergency
* You bought a home way out of your price range in order to live in a desirable neighborhood and are struggling to keep it
* You got caught in a bidding war
* You spent a fortune on décor, appliances or furniture
* One of you lost their job and now you can’t pay the mortgage
* You placed a partial deposit on a new home and risk losing it because you can’t come up with the rest
* You bought when rates were low and are now facing losing your home due to spiraling interest rates
I have listed some of the situations that might make you an ideal candidate. Please feel free to share this information with anyone you know who maybe interested and have them get in touch with me at mberg@mortgages4women.ca and I will pass your names along to the casting director.
* You put the entire down payment on credit
* You undertook major renovations that you couldn’t afford
* You consolidated consumer debt into the mortgage, over-extended on Home Equity lines of credit or took out a 2nd mortgage
* You didn’t budget for repairs and now you can’t afford to fix a home emergency
* You bought a home way out of your price range in order to live in a desirable neighborhood and are struggling to keep it
* You got caught in a bidding war
* You spent a fortune on décor, appliances or furniture
* One of you lost their job and now you can’t pay the mortgage
* You placed a partial deposit on a new home and risk losing it because you can’t come up with the rest
* You bought when rates were low and are now facing losing your home due to spiraling interest rates
Monday, May 17, 2010
Get them while they're...low!
If one good thing came out of Greece's economic hardship, it's low interest rates.
Just when it looked like rates were going to start their expected rapid upward climb, the EU announced its trillion-dollar plan to help its struggling members. The result? Scared investors fled to the safety of US and Canadian bonds, which in turn lowered fixed rates.
While variable rates are influenced by the Bank of Canada's Prime rate announcements, fixed rates are tied to the bond market. Demand for government bonds pushes yields lower and reduces the borrowing costs for banks and other lending institutions. This makes it cheaper for them to fund mortgages.
Within the last week or so, most banks cut their five-year fixed mortgage rates by approximately 10 to 15 basis points. So something that was posted at 6.25% two weeks ago is now likely sitting at 6.10%. That being said, the lowest discounted rate we could find is much lower at 4.39%.
If you haven't already, it would make sense to get your rate hold now. It will guarantee you the lower rate for the next 90-120 days as rates inevitably rise again.
Just when it looked like rates were going to start their expected rapid upward climb, the EU announced its trillion-dollar plan to help its struggling members. The result? Scared investors fled to the safety of US and Canadian bonds, which in turn lowered fixed rates.
While variable rates are influenced by the Bank of Canada's Prime rate announcements, fixed rates are tied to the bond market. Demand for government bonds pushes yields lower and reduces the borrowing costs for banks and other lending institutions. This makes it cheaper for them to fund mortgages.
Within the last week or so, most banks cut their five-year fixed mortgage rates by approximately 10 to 15 basis points. So something that was posted at 6.25% two weeks ago is now likely sitting at 6.10%. That being said, the lowest discounted rate we could find is much lower at 4.39%.
If you haven't already, it would make sense to get your rate hold now. It will guarantee you the lower rate for the next 90-120 days as rates inevitably rise again.
Monday, April 19, 2010
New Rules in Effect Today
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%.
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%.
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