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What has happened to the Variable Rate Mortgage?

October 21st, 2011 No comments

What has happened to the Variable Rate Mortgage?

It is dying a slow death!   A couple of weeks ago I was able to get a client prime less 0.85%, today that is not the case!  Tonight one of the last lenders is moving up to prime less 0.15%, which is considered a good variable rate when most of the lenders are at prime.  The reason for this change, we are told, is due to the economy which has shrunk profit margins.

The fixed rate option is looking more and more attractive as opposed to taking a new variable rate mortgage.  The 5 year rate is at an historic low….3.39 for 5 year fixed or the very attractive 4 year fixed rate of 2.99%.  The difference in payment for a variable rate and a 5 year fixed rate is $27.87 per month, based on $100,000 amortized over 25 years or $7.15 for the 4 year rate.

I think the money would be well spent having the rate guarantee for the next 4 to 5 years!

However if you are in one of those converted variable rate mortgage of prime minus 0.50% or more, what should you do?
This is the word on the street!

• The Bank of Canada has indicated that it is not looking at raising the overnight rate anytime soon or at least will hold off until such time as it sees the economy improving.

• The U.S. has no plans to increase rates for the next two years making it more difficult for Canada to raise rates unless the Canadian economy is growing in spite of the sluggish U.S. economy.

• Canada is becoming attractive for investors’ thus larger demand for Canadian bonds.  This demand is keeping the bond yields down thus lower fixed rates on mortgages.

This week is Financial Planning Week, another passion that I have is teaching people about budgeting, I hope you find the article interesting!

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Word On The Street

July 15th, 2011 No comments

Have you recently heard that to buy a home in Canada now you need to have a 10% down payment?

Fortunately for home buyers that is NOT true. Since the Canadian Governmentmost recentlychanged the mortgage rules in March of this year, there have not been any subsequent changes.

To recap, the changes that came into effect this year were:

1.The maximum amortization for high ratio mortgages (less than a 20% down payment) was changed to 30 years from 35.

2.The maximum amount you can refinance now is 85% of your home value. This was a decrease from 90% before.

3.CMHC decided to no longer insure Home Equity Lines of Credit or HELOC’s

These were the only changes that came into effect this year.

Interest Rates

Fixed interest rates saw a spike across the board in the past 2 weeks as a result of bond yields increasing steadily in the short term.

The major banks increased their 5 year fixed rates slightly over the past week and most smaller lenders followed suit with small tweaks to their rates.Interestingly RBC this week quietly decreased their fixed rates again. We can expect fixed  rates to remain low for the short term barring any unforeseen improvement in the global economic outlook.

Variable rates remain strong with Prime at 3.00% and discounts from Prime that give you an interest rate of 2.25%.Predictions for the next increase in the Prime Rate range from October to early into next year. This makes the case for variable rates with higher payments compelling at least for the time being.

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What is a Private Mortgage?

January 3rd, 2011 No comments

A private mortgage is a mortgage that is given by a private person as opposed to a bank, mortgage company or trust company providing you with the funds.  As a mortgage broker I bring clients and lenders together.  Ideally my first choice is to but a client with a mortgage company or bank; where I ensure they receive the best possible rate.  The banks and mortgage companies can provide the best rates as they are risk adverse when they grant mortgages.  They want clients with good credit, verifiable income and they want the property to be in a good marketable area.  Ideally they want the mortgage to be insured against default with one of the mortgage insurers (CMHC – Canada Mortgage and Housing Corporation, Genworth or Canada Guaranty).  If the client does not qualify for mortgage default insurance due to bad credit, provable income or the property does not meet the insurers’ guidelines.  Sometime the only way a client is going to get financing is to go to alternative sources for funding.  A private lender will take more risks than a financial institution however, then you are looking at higher rate of interest plus fees.  For a first mortgage you can look at an interest rate between 8 and 10 per cent and for a second mortgage you could be looking at paying between 12 and 15 per cent plus lender and broker fees.

This is very expensive financing and should only be sort as a last resort.  As a mortgage brokerage we do have access to private funds so if you are looking for a private mortgage please contact us for a free confidential consultation.    Tel: 1.866.824.8057 or  www.designermortgages.ca for contact information.

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5 Tips to Get Approved for a Mortgage

December 10th, 2010 No comments

If your home ownership fantasies have been rudely awakened by loan officers denying your application, it’s time to take control of your situation and learn what you can do to turn that rejection into an approval.

What Are Your Options? Everyone’s financial situation is unique. With that in mind, here are five different options for making your homeownership dreams a reality.

1.      Get a Co-signer

If your income isn’t high enough to qualify for the loan you need and if you can find a co-signer with enough disposable income, part of that person’s income can be considered toward your loan amount regardless of whether the person will actually be living with you or helping you pay the bill. In some cases, a co-signer may also be able to compensate for your less-than-perfect credit. Overall, the co-signer is guaranteeing the lender that your mortgage payments will be paid. If you decide to go this route, just make sure that both of you understand the financial and legal obligations the cosigner takes on when he or she signs the loan documents.

2.      Wait

Sometimes conditions in the economy, the housing market or lending business make lenders less generous with loans. If you’re in a climate where everyone is panicking, then it may be best to wait things out. When conditions improve, lenders may become more accommodating.  In the meantime, you can work on improving your credit score, reducing your debt and increasing your savings. While you’re waiting, home prices or interest rates could drop. Either of these changes could also improve your mortgage eligibility.

3.      Set your Sights on a Less-Expensive Property

If you can’t qualify for the amount of mortgage you want and you aren’t willing to wait, switching to a condo or townhouse instead of a house, accepting fewer bedrooms or bathrooms, or moving to a less attractive or more distant neighbourhood may give you more options. As a more drastic option, you could even move to a different part of the country where the cost of home ownership is lower. When your financial situation improves down the road, you might be able to trade up to the property, neighborhood or city where you hope to end up.

4.      Ask the Lender for an Exception

Believe it or not, it is possible to ask the lender to send your file to someone else within the company for a second opinion on a rejected loan application. In asking for an exception, you’ll need to have a very good reason, and you’ll need to write a carefully worded letter defending your case. Your letter should avoid excuses and sob stories and focus only on the facts. Explain how the incident that is preventing your loan from being approved, such as a charged-off account, was a one-time event that will never occur again. This one-time event should have been caused by a catastrophe such as a large and unexpected medical expense, natural disaster, divorce or death in the family. The blemish on your record will actually need to have been a one-time event, and you’ll need to be able to back your story up with an otherwise flawless credit history.

5.      Team Up With Someone Else

Two incomes are better than one, so if you can’t qualify on your own, perhaps you have a family member or friend that you trust enough and like enough to make a major purchase with and live with. It won’t be enough to just put them on the loan, of course – they’ll need to actually help with the mortgage payments to make it work, and chances are they won’t want to pay half the mortgage unless they’re living in the new home with you.

Conclusion
To go from rejected to preapproved, it’s important to know what lenders are looking for in an applicant. If you’ve been turned down for a mortgage, make sure to ask your mortgage professional plenty of questions about things you could do in your specific situation to make yourself a more attractive loan candidate. With time, patience, hard work and a little luck, you should be able to turn the situation around and become a residential property owner.

                                       (Source: Investopedia)

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HOME RENOVATION INTENTIONS HIGH IN ONTARIO: RBC POLL

October 28th, 2010 No comments

TORONTO, Oct. 27 /CNW/ – A majority of Ontarians (61 per cent) intend to undertake home renovations within the next two years, a slight drop from 2009 (down six per cent) but consistent with the national average (62 per cent), according to the 2010 RBC Home Renovation Survey.
While renovation planning remains popular in the province, balancing the household budget is a significant concern for Ontario homeowners with 80 per cent noting they are experiencing anxiety over their financial situation.
“Our research consistently indicates that Canadians are focusing on managing their finances and paying down debt, but they are clearly still intent on investing in their homes,” said Doug Crowe, vice-president, Mortgages, Greater Toronto Area, RBC. “Renovations don’t have to break the household budget if you get the right advice before diving into home improvement projects. A financial advisor can help you successfully balance your finances while also investing in what is often your largest asset – your home.”
Many Ontarians believe that staying within a set budget is easier said than done according to the RBC survey. While 68 per cent of homeowners had budgets in mind when completing renovations over the past two years, 51 per cent overspent and of those who exceeded their budgets, one-third (35 per cent) did so by between 11 and 20 per cent. The biggest renovation mistake identified by Ontario homeowners is “going over budget” (29 per cent), followed by “using the wrong contractor or tradespeople” (18 percent) and “doing the job myself” (13 per cent).
Nevertheless, the majority of Ontario homeowners are now “reno debt” free with 60 per cent saying that they have already paid off the costs associated with renovations completed in the past two years.
Ontarians also indicate they are settled in their homes with almost half (44 per cent) saying they have lived in the same home for more than 10 years and 40 per cent expect to remain in their current homes for more than the next 10 years. Of all the province’s homeowners, a solid majority (60 per cent) responded that they would rather renovate rather than sell and move if their home required major renovations and they had a choice.
Transmitted by CNW Group on : October 27, 2010 05:00

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