Tuesday, December 21, 2010

The Trouble with Debit Cards

If you’re like just about everyone around you and I’m sure you are, over the last 4-6 weeks you’ve been buying things for an endless list of people and trying to get it done as quickly as possible. More importantly, when you’ve found that perfect thing and taken it to the counter to pay for it, you’ve handed over a piece of plastic to cover the cost. We live in a society of instant gratification and the need for convenience. Unlike our parents or grandparents – who saved up for larger purchases – we are often tempted to splurge on bigger-ticket items simply because we have a debit card in hand when we head out “window shopping”.

And aside from overspending thanks to the advent of debit cards, consumers are also more likely to dip into overdraft, which ends up costing more thanks to fees and interest that banks charge whenever you spend more than you have in your account.

Basically, a debit card works like a cheque. The only difference is that every time you use it, you’re immediately taking money out of your account. That’s why when you overdraw it’s like bouncing a cheque – only worse because, unlike cheques, you probably don’t keep a record of every debit card purchase you make.

You may even make a bunch of small purchases before you realize you’ve spent more than you have. So before you pay for that coffee or lunch purchase with your debit card, make sure you have enough money in your account to cover it.

Revert to using cash for daily expenses...cash controls spending, plain and simple. Using cash to pay for everyday purchases such as coffee, transit, lunch and magazines alerts you to the idea that you’re actually spending real money. You just don’t get the same cautionary sense when you haul out plastic, be it a debit or credit card.

There’s a distinct cognitive event that happens when you handle money – it’s called awareness. Over the counter goes the five dollar bill and back comes a loonie, a dime, two nickels and four pennies.

Did you just add up the change above to determine how much money you have left? Did you think about what that purchase could have been? You see, you are much more conscious of this imaginary purchase than if you had paid with plastic.

Now, add in the awareness of the bills left in your wallet and you become attuned to your temporary wealth, or lack thereof. At the end of the day, what encourages or cautions many consumers about spending is knowing where you stand from a financial perspective. That’s why cash can help control spending. Using cash to pay for everyday purchases alerts you to the idea that you’re actually spending real money.

By allotting yourself a weekly cash allowance for entertainment and everyday expenses – such as that daily morning coffee or weekly movie – you are building a budget around what you can spend on these purchases. And once the money in your wallet has been spent, you have to ensure you fight the urge to withdraw more cash or resort back to using your debit card.

Be realistic about what you typically spend on these items in a week. If you routinely eat out for lunch or stop at Tim Hortons for coffee, count that as well. If you think you’re spending too much on these items, you can then decide to find a less expensive alternative, such as brown-bagging your lunch or making your own coffee.

Let’s say, for instance, that you start the week off with $50 in your wallet and you began to spend it on your purchases. You will see $50 turn into $40, $40 turn into $25, $25 turn into $15 and so on. Every time you look into your wallet, you will see what’s left over from your original $50 and be aware of how quickly your money is being spent. This alone can make you think twice before making a purchase.

Using cash instead of the convenience of debit and credit cards might seem like something out of the stone age but take a look at your parents and grandparents. They have likely never had large sums of debt they carried from month to month and have savings they should be proud of instead of embarrassed by.

Wednesday, December 8, 2010

Closing Costs – Often overlooked, always misunderstood

When buying a new home, closing costs are something everyone has to pay. Unfortunately, they often get overlooked and most homebuyers don’t understand what constitutes closing costs...maybe that’s why they get overlooked.

I think this has to do with lack of education and the fact that nobody really talks about what they are in detail, but rather just refers to them as “closing costs”. I remember when I bought my first house, the realtor didn’t talk about closing costs, the bank rep didn’t talk about closing costs and the lawyer didn’t talk about closing costs until a few days before the purchase was supposed to close and I was told I needed to produce several thousand dollars. What?! Now, of course I’m to blame as well since I didn’t seek out what costs needed to be covered and relied on the professionals I was dealing with to hold my hand through the process. Obviously that didn’t happen. I was naive, but most first-time homebuyers and some experienced homebuyers are too.

Fast forward 12+ years and you can understand why I highlight closing costs to clients at several points through the process. The last thing I want is for a client to be scrambling like I was a few days before closing, trying to cover their closing costs.

In reality, there is more to it than most would think. Here are some of the approximate costs that buyers should be prepared for:

- Legal fees of $1000-$1200 for the purchase with an additional $800-$1000 if they are also selling a home. This includes a title search, mortgage registration and discharge if applicable.
- $300 for a home inspection.
- $250 for an appraisal. In some cases lenders will require an appraisal to verify the market value of the property.
- PST on Insurance premium. If your mortgage is for more than 80% of the purchase price you will have to pay a default insurance premium, which is included in your mortgage. However, the PST on the premium is paid outside of the mortgage.
- Property tax to the vendor. If the vendor has pre-paid their property taxes for a portion of the year where you have ownership, you may be responsible to reimburse them for that portion.
- Land transfer tax. This is the biggie. There is an Ontario Land Transfer Tax and a Toronto Land Transfer Tax. Obviously buyers within Toronto are responsible for both and buyers outside Toronto are only responsible for the Ontario Tax. These taxes are tiered dependent upon the purchase price of the property. Land transfer taxes can add up. For example, the Land Transfer Tax for a $400,000 property within Toronto would be $8200 and $4475 outside of Toronto. A LTT calculator can be found here http://www.torontorealestateboard.com/LTT_splash/ltt_calculator.htm

Some of the above costs like the home inspection and appraisal would be paid for before the rest of the closing costs but I think they are worth noting since they are costs associated with the purchase that should be accounted for ahead of time.

You can see that closing costs can add up quickly. Most lenders use 1.5% of the purchase price as a ballpark estimate. Although this would give you an estimate of what to expect, I highly recommend doing a more accurate calculation. Knowing what your costs will be ahead of time will allow you to plan accordingly to have the money available or incorporate them into your mortgage if you can.

Wednesday, November 24, 2010

Mortgage Renewals – BEWARE OF BEING GOUGED!!!

This is something I posted earlier in the year that I think is always relevant and worth re-posting....

Did you know that 84% of all maturing mortgages are renewed with the same lender? 84%!! I find that staggering. Why, you ask? Well, did you also know that at least in the case of the banks, the renewal notices that get sent to you as your mortgage is maturing do not quote their best rates? Surprised...you shouldn’t be.

Why would people renew at a rate that’s not the best available? It’s just like when you walked into the bank to get your first mortgage and the quote you were given was not the best rate. It likely required you to negotiate like crazy to get a rate that still wasn’t the best available. I know, I know, it’s just so easy to sign the renewal notice and send it back and that’s it. Let me draw a comparison. Take a professional athlete who is coming to end of his contract and will be a free agent. Does he simply sign on the dotted line at the end of his contract for whatever the team is offering? Absolutely not!! He tests the free agent market and entertains offers from the open market to find out who the highest bidder will be so he can make as much money as possible. More importantly, he gets an agent to do it for him. The same goes for the world of maturing mortgages. There is a very competitive lender market out there that desperately wants your business and is willing to fight for it. Consumers should be taking advantage of their free agency and that open market to get themselves the best deal possible and save money. And just like in the sporting example, there are agents who are willing to do the shopping for you to get you the best deal. The difference is our services are free to our clients whereas a sports agent charges a hefty fee to their clients.

Most lenders send out their renewal notices 30 days before your renewal. This is by design. The less notice they give you, the less likely you are to switch to a different lender. Don't just sit back and wait for their notice to come in the mail before starting to look at the market. You can get a rate hold up to 120 days out from your renewal. That will protect you against possible rate increases in those 120days and if the rate goes down in that time, you get the lower rate. I always recommend clients get their approval and rate hold as early as possible. Then when their renewal notice comes in the mail they have a choice and the next steps are quick and easy. Getting the "most" out of your mortgage takes active management, not complacency. Over the life of your mortgage you stand to save thousands of dollars by being proactive, instead of reactive.

One of the myths about moving your mortgage to a different lender is that there are huge fees to do it. Although on closed mortgages there are penalties if you want to switch mid-term, if you are at your renewal, there are no big fees or penalties to switch to a different lender. Most lenders will charge $200-$250 and call it an Administrative Charge or Discharge fee but that fee can be included in your new mortgage and would likely pale in comparison to what you would save in interest charges if you change lenders.

If you have a mortgage coming to the end of its term in the upcoming months, give me a call so I can ensure that you’re getting the best deal possible. Just think...you don’t need to do any shopping, negotiating or accommodating the bank’s hours. I’m one phone call away, will do the shopping for you and come to you whenever it fits into your schedule.

At the very least, keep yourself informed so you have as much leverage as possible if you decide to take on the challenge of negotiating with your bank.


Sunday, November 7, 2010

Retiring with a Mortgage

Last week there was an article in the Toronto Star that discussed the amount of baby boomers who are putting off retirement or heading into retirement, still having not paid off their mortgage. With 35 year amortizations becoming the norm, most borrowers now, at least at the beginning of their mortgage, are looking at an end to their mortgage that is tickling the age, if not right into what they deem to be the age they want to retire. This isn’t necessarily a bad thing and may in fact end up being the reality. However, this doesn’t need to be the reality. Most mortgages come with flexible pre-payment plans. If you don’t want to be part of the percentage putting off retirement or still with a mortgage when you are retired, take advantage of your pre-payment options. It’s not difficult to calculate the effect that extra payments will have on the life of your mortgage. Talk to a professional, if you haven’t already, to develop your plan to get mortgage-free sooner, rather than later.

Below is the article that appeared in the Toronto Star on October 28, 2010:

Ontario baby boomers are looking to move to smaller homes in retirement. But first they have to pay off the mortgage.

A poll by TD Canada Trust released Thursday says 86 per cent of boomers want a smaller home when they retire. However, even though they say it is important to pay off the mortgage before they retire, it turns out less than half, or 43 per cent have actually done so.

One quarter of those boomers have paid off less than 40 per cent of their mortgage, meaning they have a ways to go before thinking about retirement.

About half says moving to a smaller home will help them save money, while more than a third says the new home, although smaller, will have more luxurious features.
“Moving to a smaller home can allow you to free up assets to put towards your retirement savings or enjoy in other ways,” said Farhaneh Haque, regional sales manager for TD Canada Trust.

Baby boomers are the post war generation born between 1946 to 1964,with the first wave approaching their retirement years. But an uncertain economy and falling stock markets over the last several years have meant that some boomers have had to hold back retirement or refinance their homes to stay afloat.

For their next property, boomers aren’t all rushing to the condo market either. More than half, or 61 per cent say they plan to buy detached. Condos came in second at 24 per cent. Top reasons for a detached house is that boomers still want a back yard and garden and really hate paying condo fees. Condos are popular because they require less maintenance and offer better security, and have amenities such as a gym or pool.

Meanwhile, another third of boomers are planning to buy a retirement property south of the border.

A quarter say “opportunities created by the depressed real estate market have sparked their interest,” according to the poll.

About ten per cent already own a vacation property, but another 12 per cent plan to buy on retirement.

Monday, October 25, 2010

“Interest”-ing times ahead...

There was a change in the Canadian mortgage industry last week. It was a quiet one, at least from a consumer standpoint, but I believe it will have a big impact down the road. The change, in a nutshell, is that TD Canada Trust has changed the way they register mortgages.

Up until October 18, TD registered their charges the same way other institutions did using a “conventional charge” for the amount of your mortgage. Registering your mortgage is something that you pay your real estate lawyer to do. Under TD’s new process, they are using what is called a collateral charge that is registered at up to 125% of the value of your home. The reason behind the change, according to TD, is to give homeowners easier, cheaper access to the equity built up in their homes.

It is very important to understand that this change does not mean borrowers can access 125% of the value of their homes. The same policies remain in effect, that limit all borrowers to a maximum of 95% LTV for a purchase and 90% LTV for a refinance. What it does mean, is as the value of a borrower’s home increases, if they refinance their mortgage, it will not have to be re-registered, avoiding legal fees. In the case of a refinance, clients will still have to adhere to the 90% maximum LTV policy and re-qualify for the desired amount. For example, somebody buying a house for $300,000 can borrow up to $285,000 (95% LTV) and the collateral charge would be registered for $375,000. If after 3 years, the property value has gone up to $400,000, the borrowers would be able to refinance their mortgage up to $360,000 (90% LTV) and not have to incur legal charges, provided the borrower qualifies.

The ONLY benefit I see for consumers is that they are able to avoid some legal fees, which would make just about anybody happy unless of course you’re a real estate lawyer. The drawback however, is far greater in my opinion and that is a lack of choice. What I mean by this, is there is some limitation at the time of that refinance or a renewal at the end of a term, if a client wants to switch to another lender. You see, other lenders will not accept a TD collateral charge on assignment (if you switch lenders at renewal or mid-term for a better rate), therefore switching lenders either at renewal or refinance will mean incurring legal fees. So, if you’ve got a TD collateral charge mortgage and want to refinance or have a renewal coming up, your choices are to stay with TD or pay legal fees to switch lenders.

The prohibitive aspect I can already see is the way in which it will be positioned. Upfront, I can hear clients being told that registering to 125% means “easier access to equity”. It doesn’t. The property still has to have increased in value and clients still have to qualify for the amount requested, no different than if your mortgage is not a collateral charge. The ONLY difference is that IF you refinance you avoid legal fees...but you also pay whatever rate TD is charging, no opportunity to shop for a better rate. At refinance or renewal, I can hear clients being warned about the fees. As it is, I hear it all the time when clients say their bank told them they would have to pay a “big fee” to do this or a “big fee” to do that without ever quantifying what the fee is or fully analyzing the options. I would fully expect that clients will be told they will incur a “big fee” to go to another lender. In reality, legal fees on average for a refinance are $600-$1000. I’ve even had a client whose lawyer charges $400 for a refinance. That’s the “big fee” you’ll be made to feel scared of. I’m not saying $400 or $600 or $1000 isn’t a lot of money. It is, but it may not be as much as the added interest you end up paying. The real downside for people who aren’t fully aware of their options and are successfully scared of the “big fee” is they will end up paying whatever rate TD is charging, without shopping the market. This is where analyzing your options comes into play. If TD’s 5-year fixed rate is 3.89% but you can get 3.59% at a different lender, it may be worth paying the legal fees to switch lenders. It may not, but at least doing the analysis will help you make an informed decision, rather than being scared of the “big fee” and paying whatever rate is being charged. Either do it yourself or have a professional do it for you, preferably someone without bias as to which lender your mortgage is with.

As always, my opinion is that education is paramount. Understand the conditions of your mortgage and what it is you’re signing. If you don’t understand something, ask for clarification. If you still don’t understand, ask again or ask somebody else. If you feel you’re not getting straight answers, you’re not talking to the right person. And for the love of God, don’t listen to things like “big fees” or “lots of interest” without getting it quantified.

Tuesday, October 12, 2010

Looking Beyond Mortgage Rates

It’s easy to get caught up in the idea that comparing mortgage rates will guarantee you get the best bang for your mortgage buck, especially when rates are at historic lows. While this may be true for particular situations, there are many scenarios where this strategy is not effective. Following are three reasons why it doesn’t always pay to make a decision based solely on rates.

Reason #1
Your long-term plan and risk tolerance should determine which mortgage product is right for you. This product may or may not have the lowest rate.

For instance, there are cases where lenders will offer lower rates for insured mortgages. With insured mortgages, however, you’re charged an insurance premium, which is usually added to the mortgage amount. But if you’re not planning on keeping the property for a long enough time to offset that cost, it may be better to take an uninsured mortgage with a slightly higher rate. The cost difference you will pay with the higher interest rate may still be less than what you may pay in insurance premiums.

As another example, if you prefer to budget for a consistent payment and can’t handle rate fluctuations, it may be better to go with a higher fixed-rate mortgage. If you think current rates are low enough and you will be living in your property for at least five years, it may be wise to also opt for a mortgage with a longer term.

Reason #2
One of the biggest mistakes people make when merely comparing mortgage rates is failing to consider important factors such as prepayment options to help pay off the mortgage faster, whether secondary financing options are allowed, early payout penalties, or what fees are involved.

It’s not enough to simply compare mortgage rates because you have to know what “clauses” are contained within the mortgage deal. There are also a lot of bait and switches out there where rates will be advertised but the fine print details all the potential reasons you may not get that rate. When looking at rates, make sure you ask what rate “you” will get, instead of what the best rate is…they may not be the same.

Reason #3
Lenders can change their rates at any time. As such, if you’re shopping for rates with one lender and then approach another that gives you a lower rate, it’s quite possible that the first lender has also dropped its rates. This is why it’s important to get pre-approved with a lender once you a mortgage that fits your needs. In some cases, you can secure your rate and conditions for up to 120 days.

These are just three reasons why it’s not enough to merely compare mortgage rates. The mortgage rate you may qualify for is also highly dependent on your credit score among other things. In order to get the best mortgage deals, you need to have solid credit.

It’s prudent for everyone to do their rate homework. The better informed you are, the more likely you will make a good decision. Just ensure it’s the whole product and it’s features that are best suited to you and not just the rate.

Monday, September 20, 2010

Buying vs. Renting

At some point in their lives, most Canadians have probably asked themselves whether it is better to buy or rent. Unfortunately most people look at it solely from the perspective of comparing monthly payments, but there is so much more to it than that. Ultimately, the decision is a personal choice, but it helps to look at ALL the pros and cons of buying to determine whether home ownership is right for you.

Some advantages of buying a home

Owning a home is generally considered to be a sound, long-term investment that can provide satisfaction and security for you and your family.

Each month when you make your mortgage payment, you are building equity in your home.
Equity is the portion of the property that you actually build through your monthly payment versus the portion that you still owe the lender.

At the beginning of your mortgage, more of your payments go toward paying off the interest and less toward paying off the principal. But the longer you stay in your home and the more mortgage payments you make, the more principal you pay off and the more equity you accumulate.

Most mortgages also offer you the option of making additional monthly or annual payments to reduce your principal faster. Some prepayment privileges, for instance, enable you to pay up to 20% of the principal per calendar year. This will also help reduce your amortization period (the length of your mortgage), which, in turn, saves you money.

There is also a tax advantage. If your home is your principal residence, any profit you make when you sell it is tax-free. A home can appreciate – or increase in value – as time passes, building more equity. As you build up equity, it’s usually easier to upgrade to a more expensive home in the future thanks to the profit you’ll make when selling your current home.

As an owner, you can also decorate and improve your home any way you like. Ownership tends to give you a sense of pride and can offer you and your family stronger ties to the community.

If you do decide that home ownership is right for you, it’s important to choose a home you can afford. If you can’t afford to buy your dream home, purchasing a more modest home can be a great place to start building equity that one day may allow you to buy the home of your dreams.

Since we’re currently in a buyer’s real estate market and interest rates have been dropping, now may be an ideal time to enter into home ownership for the first time.

Some disadvantages of buying a home

Since it’s easy to get caught up in the excitement of buying a home, it’s important to remember that home ownership has some additional responsibilities as well.

For one thing, a home can be expensive. Chances are, your monthly payments will be more than what you are currently paying in rent when you factor in such things as your mortgage, property taxes, repairs and general maintenance.

Owning a home ties up some of your cash flow and is likely to reduce your flexibility to move to a new location or change jobs.

While your home might increase in value as time goes by, don’t expect to get a big return quickly. There are no guarantees that your home will increase in value, particularly during the first few years. In the beginning, you could actually lose money if you sell because your home may not have appreciated enough to cover the real estate fees, and moving, renovation and other selling costs.

Real estate is, however, usually considered a good investment over the long term.

When making the decision about whether to buy or rent, it’s important to carefully choose a home you can afford, and then weigh the pros and cons. Millions of people enjoy the rewards of home ownership but, ultimately, it’s a personal decision based on your own priorities.

Tuesday, September 7, 2010

Switch After 12 Months?

One of the advantages of variable rate mortgages over fixed rate mortgages is they are easier to get out of...or at least a lot cheaper. To get out of a fixed rate mortgage, you need to pay what’s called an Interest Rate Differential. Ultimately it’s a formula that most people won’t understand, which typically results in a ridiculous penalty to get out of the mortgage. Variable rate mortgages are a little more straight-forward in that the penalty to break them is three month’s interest. Still not a “cheap” exit but there are times where it makes sense to pay the penalty to break the mortgage.

One year ago, people were paying prime rate for new variable-rate mortgages and 18 months ago it was prime + 0.60%. Today, the market is down to prime – 0.70%, or thereabouts.

For those who got their mortgage 12-18 months ago, many wouldn’t even consider refinancing as an option. But, I would argue it could be a very financially smart option.

Let me illustrate.

First, let’s assume our hypothetical borrower has:

• A 5-year variable-rate term
• A $300,000 mortgage amount
• A 25-year remaining amortization

Now, suppose:

• Our homeowner's mortgage is at prime rate (2.75%) today
• She switches to a new variable-rate mortgage at prime – 0.70% (2.05%)
• Prime rate increases 25 bps on Sept. 8
• Rates then stay put until June 2011 (according to most economists)

Here are the results:

• Interest savings: $10,014 (hypothetical over 60 months)
• Penalty: $2,062 (three-months of interest)
• Discharge Fee: $250 (depends on lender and province)
• Net benefit of breaking early: $7,702 (roughly)

Remember, the savings is in the spread against prime so whether prime goes up or down over the remaining term of the mortgage, the savings is the same. For most people, saving thousands over 3-5 years isn’t exactly the worst idea. So, if you’re currently in a variable at prime rate or above, find a mortgage planner to see if it makes sense to switch.

Tuesday, August 17, 2010

Pay Down Your Mortgage or Contribute to Your RRSP?

A fantastic question and like most in the world of finances, the answer won’t be the same for everyone. An old friend of my parents once told me, “keep your mortgage and your RRSP separate, don’t focus on one or the other but rather on both”. Very good advice but not necessarily for everyone or every economic climate. At the time, GIC’s were paying about 10% and mortgage rates were in the area of 6-7% over five years. Makes sense that if you can get a guaranteed return that exceeds your mortgage rate by 3-4% that you max out your RRSP contribution, take the tax deduction and the return on your investment and run. However, fast forward to 2010 when GIC’s are paying 2-3% and mortgage rates are around 4% over five years. The same approach doesn’t seem so appealing anymore. Aversion to investment risk and debt will be the determining of which approach is best.

There was an excellent article in the Toronto Star last week that discusses this topic in great detail. I strongly encourage taking a few minutes to read it to help you decide which approach is best for you http://www.thestar.com/business/personalfinance/article/844358--paying-down-debt-makes-sense

Tuesday, August 3, 2010

Mortgage Life Insurance Explained

As part of my licensing requirements, I must offer every client a mortgage life insurance policy.

Mortgage life insurance is simply a life insurance policy on the homeowner which will allow their family or dependents to pay off the mortgage on their home should something tragic happen to them. This is not to be confused with mortgage default insurance, which lenders require to cover their own assets if you have less than 20% equity in your home. Mortgage life insurance is meant to protect the family of a homeowner and not the mortgage lender itself.

While it is nice to think that if you were to pass away your mortgage would be paid off, is it really necessary for you to pay for this service? My wife will tell you that insurance is something I often complain about as I think as a society we are over-insured. Different little bits of insurance here and there that essentially overlap each other because the big picture is not considered.

If you are the primary breadwinner in your home and your death would leave your family without the means to pay for the mortgage, then mortgage life insurance might be a good option. However, take a look at all of your insurance requirements to see what is already being met. Do you already have a life insurance policy? Are you covered through your work benefits? What would be required should there be an untimely death in the family? These are all questions that need to be answered before deciding whether or not you need mortgage life insurance.

Trust me when I say I know what it’s like when you’re at your bank (been there, done that) and they go down their checklist of all the products to try to cross-sell you and they treat you like you’re making a huge mistake if you say “no” to the insurance. If you’ve done your analysis and don’t think you need it, be confident that you’re making the right decision for your family. I have many clients that I deal with that have had their mortgage with a bank with mortgage life insurance and when I ask them why they accepted it, more often than not they don’t have an answer aside from “my banker told me I should have it”. One recent client stands out...she’s single, no dependents, no extended family to speak of, she has about $200k of insurance through her work benefits and she was paying over $100 for mortgage life insurance because her banker told her she should have it. When I asked her who her beneficiary was she didn’t even know.

One of the issues I have with mortgage life insurance specifically is that you’re paying a constant premium to insure a declining sum. As your outstanding mortgage balance drops with your regular payments, you continue to make the same payments to insure it. Does this make sense? While I’m not able to sway clients’ decisions and can explain the pros and cons of mortgage life insurance compared to topping up or taking out a life insurance policy, I always recommend looking at the big picture to ensure that needs are being met on a whole instead of just when it comes to a mortgage.

As always, when in doubt, consult a professional. Just like me, the services of an insurance professional are no cost to you. If you’re not absolutely certain your insurance needs are being met or don’t really know what they are, I strongly recommend consulting a professional.

Wednesday, July 21, 2010

Examining No-Frills Mortgage Products

No Frills mortgages are something that started being offered in the market towards the end of my time on the other side of the fence working at a lender. Being in Product Development, I thought and still do think that these products are a fantastic development.

No Frills mortgages are just what the name implies, bare bones with little to no “features”. Most people view mortgages as being somewhat vanilla and free of features but that’s just not the case. Options like portability, assumability and pre-payment options are all things you pay for in your rate. The different features associated with your mortgage are costs to the lender that they need to hedge against and just as you’d figure, that cost gets passed on to you through your rate. IF you’re not going to take advantage of these options, it doesn’t really make sense to pay for them. Most people have the best of intentions and figure they will use the pre-payment options but in most cases it just doesn’t happen. Even if it does, I always ask clients to evaluate what might be reasonable. If a No Frills mortgage offers 5% per year pre-payment privilege, that’s $15,000 per year on a $300,000 mortgage. If you don’t think you’ll be able to pre-pay more than that per year, then it doesn’t make sense to pay an extra 0.15% on rate to have the option.

This type of product will only seem ideal for you if you have no plans or limited plans to take advantage of benefits that will help you pay off your mortgage faster – such as pre-payment privileges including lump-sum payments.

Essentially, this product is only ideal for those who want fixed payments and have limited opportunities to make lump-sum payments during the first five years of their mortgage; and property investors who need a low fixed rate and are not concerned with making lump-sum payments.

No-Frills products also won’t let you take your mortgage with you if you purchase another property before your mortgage term is up – ie, portability is not an option with this product. Portability is an important option that could save you money over the long term if the home of your dreams is within your reach before your mortgage term is up and rates have risen, which they have a tendency to do over a five-year period.

It’s understandable why these products may seem appealing. After all, during tougher economic times who has the extra cash to put down a huge lump-sum payment? And who needs a portable mortgage if they’re not planning on moving until the market picks up? But it’s important to remember that a lot can change over the course of five years – or whatever term you choose for your mortgage.

No-Frills products represent a great example of why interest rates are not the only important factor to consider when deciding whether to opt for a particular mortgage product. Much like buying a car, you get what you pay for. If you don’t want a car with air conditioning, a stereo, a cup holder, and so on, then you can get the cheapest car going. The key is to evaluate your situation properly and sure you only pay for what you need.

Tuesday, July 6, 2010

HST and How it Affects Home Purchases

There always seems to be a certain few questions I always hear when they are a hot topic in the media. Lately the big question has been regarding the HST. The question hasn’t really been what effect it has but rather if there was a lot more activity leading up to July 1st with people trying to make a move before the HST starts.

I attribute the way the question is asked to the fact that people don’t really know what the effect is and just assume it’s bad. The reality is that the HST won’t have the tremendous impact on those looking to make a move as people may think. I think that’s likely true of most things the HST will impact because most people would much rather throw their arms up in the air and curse the Government than educate themselves as to how it will impact their bottom line. Don’t get me wrong, I’m not pro-HST, quite the contrary. What I am is pro-education.

Here are a few things the HST WILL NOT impact:

- Resales – there is not tax on a resale home.
- New Home Purchases – there is no tax on new builds less than $400,000.
- Condo Fees – there is no tax on condo fees.

...and a few things the HST WILL impact:

- New Home Purchases – there will be HST charged on new builds more than $400,000, however builders will include the HST in their “sticker price” so there are no surprises – make sure you read your agreement carefully to ensure this is the case.
- Real Estate Commissions – there will be HST charged on real estate commissions whereas it used to be that only GST was charged.
- Legal Fees - there will be HST charged on legal fees whereas it used to be that only GST was charged.
- Default Insurance – if you make a down payment of less than 20% of the purchase amount, you will require default insurance, which the HST will apply to whereas it used to be only PST.

There’s no doubt the HST has an impact on the Real Estate Market. However, on a typical transaction the impact will be in the hundreds of dollars, not the thousands that I think most people believe. If you’d like to see more of what products and services are affected by the HST, there is a very good list that can be found here http://www.rev.gov.on.ca/en/taxchange/pdf/taxable.pdf

Monday, June 21, 2010

The Importance of Regular Mortgage Check-Ups

This is a topic I’ve talked about in the past and will continue to because I think it’s a very important one. People don’t invest money and forget about it. Wise investors constantly monitor the performance of their investments to ensure they are getting the best returns for their money. So why would people not do the same with their mortgages? We pay a lot of interest over the life of our mortgages, wouldn’t you want to pay less if you could? I’m not saying you need to look at your mortgage details vs. the market daily, weekly or even monthly but at least once per year and most certainly at renewal time. In my opinion, anyone that simply signs a renewal notice that comes in the mail and returns it without looking at the market is likely throwing money away. I think people are so uncomfortable with the thought of that much debt or the little amount of principal that gets paid down every year that they do their best to ignore their mortgage as much as possible so it doesn’t “bother” them. Again, throwing money away. Below is an article that ran recently in the Financial Post...a good read....

Andy Holloway, Financial Post • Friday, Jun. 11, 2010

While about 80% of Canadians visit a doctor at least once a year to help ensure they remain physically healthy, the number of people who check their financial health by regularly reviewing their mortgage is far less.

Plenty can change in someone’s life in a year, never mind during the standard five-year mortgage a lot of Canadians sign up for. A career change, kids, retirement or newfound money or it could be that such a major event is on the horizon. All can affect the type of mortgage that fits just right.

“A lot of people don’t like to face up to it but, doing an annual financial check-up is a very smart thing to do,” says Peter Aceto, CEO and president of Toronto-based ING Direct Canada. “Managing your financial lifestyle is just as important as managing your diet and exercise.”

Aceto says people often just wait for a renewal letter before they look at their mortgage, and even then they’ll likely send the contract back without considering if it is meeting their current needs because they feel changing providers or the terms is futile. But they should put just as much thought into a renewal or a review as they did when they signed the initial deal.

Kelvin Mangaroo, founder of RateSupermarket.ca, which compares mortgage rates and brokers across the country, agrees. “Canadian consumers tend to become complacent about their mortgage payments and they could be saving a lot of money.” He says home owners should annually review three main things: their current and expected future risk profile and net income as well as rates.

For example, the more adverse you become to risk, the less likely a variable mortgage will be right for you. Aside from comparing rates, Ratesupermarket.ca has a few other online tools that can help consumers figure if a change is a good thing, such as a mortgage calculator and a mortgage penalty calculator that will show how much you can expect to pay to break your existing mortgage. You can also sign up for e-mail alerts that tell you when rates change.

Rates are an obvious thing to pay attention to. If they’re going up, make sure you can make the higher monthly payment that may come at renewal time, or lock into a fixed rate if you’re on a variable. If rates are dropping below your existing rate, you might want to refinance or renew early.

“You’re making a commitment to be mortgage free in 25 years so you should have a longer term view of what interest rates will look like over that period, says Aceto. “Make sure you’re comfortable with them and comfortable making those payments.”

Even though banks are in the business of getting as much interest from you as they can, many will allow people to pay a lump sum of the principal on the mortgage’s anniversary and increase their monthly payments. An extra $100 a month on a standard $200,000 mortgage could save almost $18,000 in interest and shorten the amortization period by about four years, according to Aceto.

Paying down your mortgage faster may seemingly put a crimp into your future finances if something happens and you need the money — unlike, say, putting it into a tax-free savings account or other low-risk liquid investment. But many financial institutions have a re-advance clause that allows you to retrieve some of the money spent accelerating mortgage payments, says Peter Veselinovich, vice-president of banking and mortgage operations at Winnipeg-based Investors Group.

Of course, it may become more difficult to get those funds back if there is a dramatic downward change in housing values and you haven’t built up enough equity. But that’s where understanding your entire financial situation, not just your mortgage, can help. “Most of us don’t like to think about debt, says Veselinovich. “It’s just something that somehow comes up and ends up as part of our personal balance sheet and we make payments.”

Even something simple such as making renovations could affect the type of mortgage desired. For example, topping up or refinancing an existing mortgage can pay for renovations, providing you’re comfortable with a blended interest rate. If you’re buying a new home, you may be able to port your current mortgage. Or maybe you just want to consolidate higher-interest unsecured debt into your mortgage. “Rolling that into your mortgage can significantly save on interest costs and that will help you get out of debt sooner,” says Feisal Panjwani, a Surrey, B.C.-based broker with Feisal & Associates under the Invis Inc. umbrella.

A mortgage can also help you become more tax efficient if you’re thinking of investing in a business, buying a rental property or putting some money into mutual funds or the stock market. That’s because the interest paid on money borrowed on a principal property can be written off against revenue from those investments.
But the biggest reason for making changes to your mortgage mid-stream may be because it could be a lot easier to do something before your situation changes. “Making changes to your mortgage before you go into a new venture or before you retire would allow you to qualify much easier rather than waiting for your mortgage to come up for renewal,” says Panjwani.

Wednesday, June 9, 2010

Have You Considered Opting for a 50/50 Mortgage?

Like the potential savings of a variable rate mortgage but uneasy about the potential rate fluctuation? Prefer the safety of a fixed rate mortgage but think you’re willing to take a little risk for the potential savings of a variable rate? Hybrid mortgages – also known as 50/50 mortgage products – include an equal mix of fixed-rate and variable-rate components within your single mortgage. This means you get the best of both worlds – the security of fixed repayments with the flexibility of a variable rate.

Although there was a time in recent years when mortgage experts considered a variable-rate mortgage as the obvious choice to save mortgage consumers money over the long term, with fixed rates remaining near historic lows, a 50/50 mortgage may be a great alternative for you.

In essence, since it’s extremely difficult to accurately predict rates over the long term, a 50/50 mortgage offers interest rate diversification, which can help reduce your level of risk.

If you opt for a 50/50 product, half of your mortgage is locked into a five-year fixed rate and half is at a five-year variable rate. You can lock in your variable-rate portion at any time without paying a penalty. As well, each portion of the 50/50 mortgage operates independently – like two separate mortgages – yet the product is registered as only one collateral charge.

The 50/50 mortgage product is well-suited to a variety of borrowers, including those who:
• Would normally go fully variable but are afraid prime rate is at its bottom
• Aren’t comfortable being locked into a fully fixed rate
• Can’t decide between a fixed or variable mortgage
• Savvy first-time homebuyers

Some features of the 50/50 mortgage include:
• 20% annual lump-sum pre-payment privileges
• 20% annual payment increase ability
• Portability (transferring your existing loan amount to a new property)

There are also hybrid mortgages available that offer different blends than 50/50. These are best suited to those people who are willing to actively manage their mortgage. The mortgage, up to 80% of the value of the house, can be split in whatever percentage the borrower prefers, between fixed rate, variable rate and line of credit. As the principal is paid down, the available amount on the line of credit goes up. Each portion of the mortgage carries different rates and the variable and line of credit portions are tied to the Prime Rate so they can fluctuate. Not for nor borrowers who want to know what their payment will be every month for the next five years but great for those who want a little bit of flexibility from their mortgage.

Ask your mortgage professional for more information if you think a hybrid mortgage may be right for you.

Tuesday, May 25, 2010

The End is Near for Record Low Variable Rates!

With the beautiful weather we had over the weekend, there is no doubt that summer is here. Along with the beginning of summer comes the end of the Bank of Canada’s commitment to keep its Overnight Rate, which in turn affects the Bank Prime Rate, at a record low of 0.25% (Prime is currently at 2.25%). Although the B of C had originally committed to leaving its Rate unchanged until the July announcement, at its last announcement it all but guaranteed that the rate will be increasing at its next announcement on June 1st.

Hopefully those of you who have been enjoying huge savings month after month over what you would have been paying in fixed rate mortgages have been disciplined and done something with that savings...either put it down as lump payments or put it aside and invested it. If you haven’t, don’t worry, it’s not too late. Prime has never increased by more than 0.25% at a single time so that means in all likelihood, those paying the going rate of 1.75% (Prime minus 0.50%), won’t see a big jump in your monthly payments and will still be saving plenty over fixed rates. So, start doing something with that savings!

What remains to be seen is what will happen during the B of C announcements over the next year or two. That will be what really determines if being in a variable rate mortgage will have been the wise move over being in something fixed. The Big 5 Banks are all forecasting the Overnight Rate will be increasing by a little over 1% by the end of 2010 and around 3% by the end of 2011. Those are significant increases...the only problem I have with those numbers is that the Banks’ more profitable products are fixed over variable so could they be creating a little fear in consumers to lock into something fixed and not assume the risk that is variable. I’m not saying they’re wrong, I’m just looking at the whole picture of why they are forecasting such significant increases. In my opinion (I’m not an economist, just someone with an opinion), the B of C promised to keep the rate low to stimulate the economy. Now that the economy has picked up, they can’t just hit the accelerator on their rate and assume the economy will react favourably. I believe the rate will go up over time but slowly as the B of C will have to measure the impact to the economy with each increase to ensure the economy can sustain its growth despite rising rates.

Over the last year or so I think the huge discount seen in variable rates has likely attracted consumers who were historically “fixed” borrowers and as a result they saved themselves money. Now that those rates are going to start increasing, it will be interesting to see how the tides shift or if they shift back to fixed rates either for new borrowers or variable borrowers who become nervous about the idea of rates increasing and want to lock into a fixed rate. The good news is there are still excellent fixed rates available. Whatever the result, the fact that the low rates has attracted more borrowers to variable rate mortgages is a great thing because it has opened up peoples’ eyes to the fact that there are lots of mortgage options out there besides the 5-yr fixed that the Banks always lead with.

Whatever your preference, ensure that when it’s time to shop for a mortgage or a renewal, that your mortgage professional shows you all the options so you can make an informed decision for what’s best for you.

Friday, May 14, 2010

Budgeting Towards Homeownership

Transitioning from renter to homeowner is one of the biggest decisions you’ll make throughout your lifetime. It can also be a stressful experience if you don’t plan ahead by building a budget and saving prior to embarking upon homeownership.

Budgeting is a core ingredient that helps alleviate the stress associated with money issues that can sometimes arise if you purchase a home without knowing all of the associated costs – including down payment, closing expenses, ongoing maintenance, taxes and utilities.

The trouble is, many first-time homeowners fail to carefully think about their finances, plan a budget or set savings aside. And in this society of instant gratification, money problems can quickly escalate.

The key is to create a realistic budget based on your goals. Track your spending and make your dollars go further by sticking to your budget once it’s in place. Budgeting offers a step-by-step formula for figuring out how to best save your hard-earned money to invest in homeownership.

Start by listing your household income, then your household expenses, and review your spending habits. All of this can be done on a pad of paper or on a computer spreadsheet.

Keeping receipts for everything that you purchase will enable you to accurately keep track of where your money is going each month so that you can review and make necessary changes to your plan on an ongoing basis.

Examine all areas of your life from entertainment to the type of food you buy, where you buy your food and clothes, and how and where you travel. Also look at your spending personality and make necessary adjustments. Are you a saver, a splurger, a spontaneous shopper or a hoarder? Become smarter with your money and avoid impulse buying.

If you find you’re spending a lot of money in one area, such as entertainment for instance, set aside a reasonable amount each month and prepare to stop spending money in this area once your budget has been exhausted.

If you can set your budget solidly in place before you head out home or mortgage shopping, you will be far more prepared to purchase your first home.

Following are three top tips to help you prepare for the purchase of your first home:

1. Set up a savings account. You can deposit a predetermined amount into this account each pay period that you will not touch unless it’s absolutely necessary. This will enable you to put money aside for a down payment and cover closing costs, as well as address ongoing homeownership expenses such as maintenance, taxes and utilities.

2. Save up for big-ticket items. As you accumulate money in your savings account, you will be able to also save for specific purchases to help furnish your home – avoiding the buy now, pay later mentality, which can have a negative impact on your credit when you’re seeking mortgage financing.

3. Surround yourself with a team of professionals. When you’re getting ready to make your first home purchase, enlist the services of a licensed mortgage professional and a real estate agent. These experts are invaluable to you as you set out on the road to homeownership because they help first-time buyers through the home purchase and financing processes every day. They will be able to answer all of your questions and set your mind at ease. A mortgage professional has access to multiple lenders, can show you what all the financing options are and can help you get pre-approved for a mortgage so you know exactly what you can afford to spend on a home before you head out house hunting, while a real estate agent will be able to match your needs with a house you can afford. Both parties will negotiate on your behalf to ensure you get the best bang for your buck. And, best of all, these services are typically free. They will also be able to refer you to other reputable professionals you may need for your home purchase, including a real estate lawyer and home appraiser.

You only have one chance to do the right things financially to set yourself up to purchase your first home. It’s easy to overextend yourself and not so easy to dig yourself out of it. Take the time, budget properly, do it right and you’ll be better off in the long-run.

Wednesday, May 5, 2010

Choosing Your Mortgage Amortization

Selecting the length of your mortgage amortization period – the number of years it will take you to become mortgage free – is an important decision that will affect how much interest you pay over the life of your mortgage.

While the lending industry’s benchmark amortization period is 25 years, and this is the standard that is used by lenders when discussing mortgage offers, and usually the basis for mortgage calculators and payment tables, shorter or longer timeframes are available – to a maximum of 35 years.

The main reason to opt for a shorter amortization period is that you will become mortgage-free sooner. And since you’re agreeing to pay off your mortgage in a shorter period of time, the interest you pay over the life of the mortgage is, therefore, greatly reduced.

A shorter amortization also affords you the luxury of building up equity in your home sooner. Equity is the difference between any outstanding mortgage on your home and its market value.

While it pays to opt for a shorter amortization period, other considerations must be made before selecting your amortization. Because you’re reducing the actual number of mortgage payments you make to pay off your mortgage, your regular payments will be higher. So if your income is irregular because you’re paid commission or if you’re buying a home for the first time and will be carrying a large mortgage, a shorter amortization period that increases your regular payment amount and ties up your cash flow may not be the best option for you.

Your mortgage professional will be able to help you choose the amortization that best suits your unique requirements and ensures you have adequate cash flow. If you can comfortably afford the higher payments, are looking to save money on your mortgage or maybe you just don’t like the idea of carrying debt over a long period of time, you can discuss opting for a shorter amortization period.

Advantages of a longer amortization

Choosing a longer amortization period also has its advantages. For instance, it can get you into your dream home sooner than if you choose a shorter period. When you apply for a mortgage, lenders calculate the maximum regular payment you can afford. They then use this figure to determine the maximum mortgage amount they are willing to lend to you.

While a shorter amortization period results in higher regular payments, a longer amortization period reduces the amount of your regular principal and interest payment by spreading your payments out over a longer timeframe. As a result, you could qualify for a higher mortgage amount than you originally anticipated. Or you could qualify for your mortgage sooner than you had planned. Either way, you end up in your dream home sooner than you thought possible.

Again, this option is not for everyone. While a longer amortization period will appeal to many people because the regular mortgage payments can be comparable or even lower than paying rent, it does mean that you will pay more interest over the life of your mortgage.

Still, regardless of which amortization period you select when you originally apply for your mortgage, you do not have to stick with that period throughout the life of your mortgage. You can always choose to shorten your amortization and save on interest costs by making extra payments when you can or an annual lump-sum principal pre-payment. If making pre-payments (in the form of extra, larger or lump-sum payments) is an option you’d like to have, your mortgage professional can ensure the mortgage you end up with will not penalize you for making these types of payments.

It also makes good financial sense for you to re-evaluate your amortization strategy every time your mortgage comes up for renewal (at the end of each term of your mortgage, whether this is three, five, 10 years, etc.). That way, as you advance in your career and earn a larger salary and/or commission or bonus, you can choose an accelerated payment option (making larger or more frequent payments) or simply increase the frequency of your regular payments (ie, paying your mortgage every week or two weeks as opposed to once per month). Both of these features will take years off your amortization period and save you a considerable amount of money on interest throughout the life of your mortgage.

Monday, April 19, 2010

New Mortgage Regulations in Effect.......

Poof...just like that and it’s harder to qualify for a mortgage or at least you’ll qualify for less than you would have a week ago. The new government regulations have completely gone into effect as of today. Here is a brief snapshot of what they look like:

• All borrowers must meet the standards for a five-year fixed-rate mortgage even if they choose a mortgage with a lower interest rate or a shorter term. This is meant Canadians prepare for higher interest rates in the future.
• Lower maximum amount Canadians can withdraw when refinancing their mortgages to 90% from 95% of the value of their homes. This will help ensure home ownership is a more effective way to save.
• Require a minimum down payment of 20% for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation (investment properties).

Another change that went into effect on April 9th that didn’t get much attention:

• Self-employed borrowers are now limited to borrowing 90% of the value of their homes and can only have been in business for less than 3 years to in order to qualify for CMHC’s self-employed program.

I won’t get into how limiting the self-employed changes for small-business owners will be. It wasn’t like the old rules made it all that easy. The change I’m still most curious about is the change in qualification criteria (1st point above). The jist of it is that if you take out a five-year fixed mortgage, you qualify at the rate you’ll be paying, which currently is in around 4.49%. If you take a variable mortgage or a fixed mortgage of less than five years you qualify at the Bank of Canada 5-yr rate, currently at 5.85%...soon to be 6.10% on Wednesday. So, if you’re looking at a variable mortgage that’s charging 1.75% right now, you need to qualify at 6.10%. That means your income needs to be approximately 25% more than it did last week in order to qualify for the same mortgage or, where a family earning $90,000/year would have qualified for a mortgage of $350,000, they will now only qualify for a mortgage of $265,000. However, if they choose a five-year fixed mortgage, they will qualify for $310,000. What this means is for a lot of people, not all, an element of choice has been taken away. Where people were starting to see that there was more out there than five-year fixed mortgages, we’re now going to back to that being by far the most popular choice. Is it a coincidence that the five-year fixed just happens to be the most profitable product for the banks? Is it also a coincidence that the leaders of our banks have closed-door meetings with the Minister of Finance and the Bank of Canada? I’ll let you decide. You can probably guess what I think.

There is a slight bit of silver lining. The above changes are for high-ratio (greater than 80% loan-to-value) mortgages, although the banks have implemented the changes to their conventional mortgages (less than 80% loan-to-value). However, some lenders in the broker market are still following the old rules of qualification for conventional mortgages. So, for those of you with less than an 80% loan-to-value, you still have some choice if you go through a broker but if you still deal with a bank, you’re more than likely going to be jammed into a five-year fixed mortgage.

The ironic part is that the government thinks that what they're doing will help consumers by ensuring that if rates go up, they will still be able to afford their payments, lowering the level of default. However, what they are also doing is creating the bubble that they claim to be trying to protect us against since homebuyers won't be able to qualify for as much, which will eventually drive down the cost of real estate.

Wednesday, April 7, 2010

Fixed Rates Increase and Create the Biggest Fixed-Prime Spread in 30 Years

Well, the smoke has finally cleared after the fixed rate increases from last week. The biggest single-day jump in fixed rates in 14 years created record volumes at lenders as borrowers rushed to get applications and pre-approvals in before the hikes took effect. What also resulted from the increase is the biggest Fixed-Prime spread in 30 years. The spread (difference) between discounted 5-year fixed and 5-year variable mortgage rates is currently about 240 basis points.

Based on estimates (there is no record of historical pricing on discounted fixed and variable rates), that is one of the biggest spreads in a very long time. The only historical data that is kept is the between the posted 5-year fixed rate to prime rate, the spread between the two right now is 360 bps.

That’s the biggest spread in the last 30 years (based on monthly data from the Bank of Canada).

Technically, today’s posted Fixed-Prime spread is tied with the 360 bps reading we saw last summer. The difference is that variable rate discounts last summer were nowhere near the P - 0.50% we have today.

To put it another way, today's plump Fixed-Prime spread indicates what many already know: fixed rates are selling for a major premium over riskier variable rates...or is it that variables are selling at an extremely deep discount? It is likely the spread will close when the Bank of Canada starts increasing its Overnight Rate early in the summer as is widely anticipated. Some analysts are expecting the Overnight Rate to increase from 0.25% now, to 1.25% by the end of the year. Even with that “big” of an increase, variable rates still stand to be below 3% compared to the discounted 4.35% 5-yr fixed rates that are available now.

This is meant to be some food for thought rather than predictive but consider this; if you look back to 1980 for cases where there’s been a 2%+ fixed-prime spread, prime rate has never averaged more than 1.75% higher in the five years that followed.

Will 2010-2015 be the first such instance? Time will tell. But one thing’s for certain, today’s fixed rates are trading with a huge built-in “insurance premium,” and the 2.40 percentage point edge gives variables a big head start as we move into the next rate hike cycle.

Friday, March 19, 2010

Tips for Paying Off Your Mortgage Faster

Sniff...sniff...can you smell that? Spring is definitely in the air! With near record temperatures in the GTA this week it definitely feels like Spring is here. Along with the inevitable arrival of Spring comes a very busy real estate market. It seems like every day I see new “for sale” signs posted on the lawns in my neighbourhood and just as fast as they go up it seems the “sold” signs are just as quick to follow. With action in the real estate market, there is obviously also action in the mortgage market. As such, it seems like a good time to give some tips to pay down mortgages quicker for all those folks moving into new homes, taking on potentially bigger mortgages or just for people looking to become debt-free quicker.

Mortgages in Canada are generally amortized between 25 and 35 year terms. While this seems like a long time, it doesn’t have to take anyone that long to pay off their mortgage if they choose to do so in a shorter period of time. With a little bit of thinking ahead, and a small bit of sacrifice, most people can manage to pay off their mortgage in a much shorter period of time by taking positive steps such as:

• Making mortgage payments each week, or even every other week. Both options lower your interest paid over the term of your mortgage and can result in the equivalent of an extra month’s mortgage payment each year. Paying your mortgage in this way can take your mortgage from 25 years down to 21.
• When your income increases, increase the amount of your mortgage payments. Let’s say you get a 5% raise each year at work. If you put that extra 5% of your income into your mortgage, your mortgage balance will drop much faster without feeling like you are changing your spending habits.
• Mortgage lenders will also allow you to make extra payments on your mortgage balance each year. Just about everyone finds themselves with money they were not expecting at some point or another. Maybe you inherited some money from a distant relative or you received a nice holiday bonus at work. Apply this money or even part of it to your mortgage as a lump-sum payment towards your mortgage and watch the results.

If making lump payments or increasing your payments during the term of your mortgage isn't something you think you'll do, it's important to let your mortgage professional know that upfront. Lenders have started to offer products with names like "No Frills", which offer lower prepayment privileges (eg. 5% per year as opposed to 20%) in return for a lower rate. So, that little bit of planning can save you money even without having to to make any extra payments.

By applying these strategies consistently over time, you will save money, pay less interest and pay off your mortgage years earlier!

Friday, March 12, 2010

Regulation Overkill!!!

Sorry folks, this is going to be a long one. A few weeks ago I posted an entry an about some proposed government changes to mortgage insurance regulation and at the time had mixed feelings about it. I think my opinion has changed....significantly!! At the time there was some ambiguity in the changes that have been clarified by the Feds and in my opinion they are definitely detrimental to the Canadian mortgage market.

The initial announcement stated that all borrowers with a loan-to-value ratio greater than 80% taking terms of five years or less, whether variable or fixed would have to qualify at the five-year fixed rate. This would ensure that if borrowers were taking shorter fixed terms or variable terms that in theory if rates go up over the course of the term, they would be able to carry a larger debt-load and there would be less of a payment shock. The ambiguity is that the announcement didn’t say WHAT five-year rate would be used to qualify. After all, there are posted rates, special rates, discounted rates, broker rates...you get the jist. Well, they cleared up the ambiguity by explaining that it’s the chartered banks five-year posted rate (or the contract rate, whichever is greater) that will be used. The chartered banks’ five-year posted rate right now is 5.39%. This is the rate you’ll see on their websites and renewal statements and I’d be very surprised if anybody still pays these rates. The flipside is the discounted rates available in the broker world. I’m not talking specials or quick closes or anything like that, I’m talking about straight-up, five-year, 120-day rate hold rates, which right now are at 3.79%. So, for people taking a 3-year variable at 1.75% (currently) or a 4-year fixed at 3.69%, they need to qualify at 5.39%!! Most people don’t know that prior to this announcement, variable mortgages were qualified at the 3-year fixed rate so there was already some protection built in but the 5-year posted? Can you say EXCESSIVE!?!? Here’s where it gets even more annoying...for anyone taking a 5-year or greater fixed rate, they will be qualified at the contract rate. So they would qualify at the 3.79% mentioned above for five years. That means a borrower looking at a 3-year mortgage which is currently at 3.35% would have to qualify at 5.39% but someone looking at a 5-year fixed would qualify at 3.79%. Ultimately for anyone borrowing at a loan-to-value of greater than 80%, they just had most of their choice taken away. The difference in buying power between qualifying at the contract rate and the posted rate is huge. That means in order to maximize buying power, borrowers are forced to go at least with the five-year fixed. It’s like the high-ratio market has stepped back 25 years where there was hardly any choice available.

Another forthcoming regulation change that managed to slide through that I didn’t mention in my previous post is a change that will affect small business owners. There is a high ratio program available right now that allows small business owners to qualify for mortgages using non-traditional means of proving their income. That means not using T4’s and tax returns to prove their income. Instead, they’ve been able to use an option called stated income to declare what their “real” income is as opposed to what they make on paper. In these cases, the lenders and insurers would assess the reasonableness that a borrower makes what they say they make. Makes sense since one of the goals of small business owners is to minimize their taxes and ultimately the income they make on paper. Since this works in a negative way for mortgage qualification, the above program was set up to help those borrowers. Until now, they’ve been able to borrow up to 95% of the value of the property. As of April 9th 2010, they will only be able to borrow up to 90%. Might not seem like that big of a deal but one of the things common amongst all small business owners is the desire to make your money work as much as possible for you. That additional 5% down payment is money that could be working in other ways for them, like growing their businesses. The other element to this change that has an even greater impact in my opinion is that it used to be that the length of time you were in business was irrelevant, after April 9th, if you’ve been in business for more than 3 years you won’t be able to take advantage of this program. So, anyone in business more than 3 years will have to prove their income or in other words, use what they report as income on their personal tax returns. This change has huge impacts on small business owners who will ultimately have to put more money down on their purchases instead of being able to leverage themselves and use their cash for more productive things.

Now that the changes are more clear, I truly believe they’re excessive. I understand that the Government is doing what they think is best to protect against what happened to the mortgage industry in the US. However, even at our most aggressive point, we were never even close to what the US mortgage system was like. They had 125% mortgages and the 2/28 mortgage. For those of you who don’t know what that is, it’s the product that essentially caused the US turmoil. Where our government is trying to defend against the payment shock of increasing rates, US lenders actually built the shock into the product. It went like this, lenders were selling 30 year mortgages to clients that had a low, teaser rate for the first two years then after two years it would go up by sometimes 4-5% for the remaining 28 years. The craziest part of it was that lenders were qualifying clients at that low, teaser rate and telling them not to worry about the higher rate after two years because “of course” property values will go up in those two years at which point you can refinance and never have to deal with those higher rates. Well guess what happened when property values didn’t go up...people couldn’t afford the higher payments and the sh!t started hitting the fan. The point is our system is so much more conservative than the US system yet the Government seems to think it needs to over-regulate us to protect us from ourselves. The ironic thing is that they think they’re protecting us from a potential housing bubble when there are no signs of there actually being one. Except, with borrowers buying power being reduced, sellers won’t be able to sell their homes at the prices they’d like, ultimately driving the overall market down and creating a mini-bubble.

Wednesday, March 3, 2010

Are rates going to go up?

Hands down, without question, nothing even comes a close second...this is the question I hear the most. I’m not sure if it’s that people really wonder or if they just want me to say “no” or “I don’t think so” to give them some sort of comfort. My standard disclaimer is always that nobody can predict with absolute certainty, and then I launch into my opinion. By nature I’m not a good liar, in fact I’m probably honest to a fault. I’m certain there are a lot of people out there in my position who would tell potential clients whatever it is they want to hear, in order for them to become clients. I’m not sure why anyone would do that but everyone has their own approach and that just isn’t mine. My approach is always complete honesty, providing my own opinion and for the most part always erring on the side of caution. The advice I give borrowers always provides the risks involved in a very clear way so an informed decision can be made. It’s a long-term relationship and I can’t understand why anyone would compromise that relationship with dishonesty. Short-term thinkers I suppose.

Back to the topic at hand, rates. Are they going to go up? The question to me isn’t if but when. Of course they’re going to go up. They’re at record lows and the economy is showing some positive signs. Sure, we might see fixed rates stay around the same level or dip a tiny bit through a competitive spring market but by and large, they are going to go up. The Bank of Canada yesterday announced once again no changes to their Overnight Rate of 0.25%, which in turn causes Prime to remain at 2.25%. This is not a surprise since the B of C has been saying since 2009 that they intend to leave things the way they are until end of Q2 2010. The reality is that the Real Estate market has been driving the economy for the better part of a year so to increase rates would be like pouring water on the fire that’s providing you with enough warmth to stay alive. Now that other economic indicators are showing positive signs, what do you think is going to happen at the end of Q2? My money is on the B of C increasing their overnight rate. I’m not talking by a lot, they’ve never raised it by more than 0.25% so it’s a good bet that’s what will happen. I believe they will need to be very cautious about increases since too much too fast could be very detrimental. As for fixed rates, different economists have been saying different things about fixed rates for some time now. Some say they’re going to increase before the B of C increases the Overnight Rate and some say it won’t be until the Fall but the common theme is the word “increase”. Everybody agrees rates are going to go up but nobody knows when.

My advice to anyone who prefers variable mortgages has been to take advantage of your low payments now, put some of that savings aside because rates are going to go up at some point and having a little extra put aside will help. For those who favour fixed rates, if you’ve been sitting in a variable waiting for the right time to lock into something fixed or are considering refinancing, consider doing it sooner rather than later. I’m not saying you need to do it tomorrow, but waiting too long might cost you. Same goes for people with renewals in the next few months, make sure you get your rate holds now!

Thursday, February 18, 2010

Government intervention....from where I sit....

This week we once again saw the government propose changes to mortgage insurance regulation that will go into effect on April 19th 2010. For anyone who hasn’t seen what the changes will be, here they are in a nutshell:

• All borrowers must meet the standards for a five-year fixed-rate mortgage even if they choose a mortgage with a lower interest rate or a shorter term. This will help Canadians prepare for higher interest rates in the future.
• Lower the maximum amount Canadians can withdraw when refinancing their mortgages to 90% from 95% of the value of their homes. This will help ensure home ownership is a more effective way to save.
• Require a minimum down payment of 20% for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.

Normally I’m not a big supporter of excess regulation by the government but with this one I’ve got mixed feelings. The government is basically trying to protect consumers and lenders from ourselves. It’s hard not to look south of the border and see why Jim Flaherty would want to impose such measures and protect our economy from what happened in the US. With the changes above, borrowers are forced to qualify at a rate that ensures they will still be able to afford their payments should rates rise and they’re also forced to maintain an equity level of at least 10%, which will a) provide an equity buffer should real estate values fall and hopefully prevent homeowners from getting into a negative equity position and b) help Canadians with their “savings”.

I’m all for bolstering the economy and preventing potential disasters down the road. It’s good to have a little foresight, learn from experience and make positive changes. What I have a problem with is the scope of that foresight and the changes they decided to implement. The scope is very narrow and doesn’t take into account all the elements that make up homeowners’ debt. I’ve made mention of this in the past but what about the predatory practices of credit card companies that keep sending notices that they’ve increased your limit until before you know it you have a $30,000 visa limit with an 18% interest rate. Or retail cards that are able to charge 30%?! How many people that were lined up for hours and hours on boxing day at electronics stores bought their computers and big screen TVs on their retail cards and are now paying 30% to finance those purchases? Shouldn’t the government be looking at regulating some of those practices to protect Canadians? Right, the Government effectively controls mortgage insurance in Canada so it’s a much easier change to implement rather than going after big business to pull back the reins.

I see first-hand the amount of people who use their homes as an ATM. As the values go up, they’re constantly removing equity to pay for other things or pay off the debts they’ve accumulated outside their mortgages. Unfortunately, limiting them to how much equity they’re going to remove from their homes isn’t necessarily going to help them. In a lot of cases it will actually hurt them. It means they will likely end up carrying more high interest debt than if they were able to refinance. In my opinion, forcing all possible lenders (mortgage, credit card, retail, etc.) to have more customer-friendly practices would be a much better long-term solution.

The glaring piece I see missing from the Government changes is education. I see the proposed changes like a parent trying to protect their kids by constantly saying “you can’t do this, you can’t do that” without actually explaining why. As a parent I always do my best to explain to my kids why they can or can’t do something so they can learn. They need to understand why and what they’re being protected from so at some point they can protect themselves. If I constantly say “no, no, no” without explaining myself, they’ll never be able to make their own decisions and good ones at that. I’ve said this for years that there is a huge gap surrounding personal finances in our educational system. Kids aren’t being taught how to manage finances. Like so many other things it seems the system leaves that to parents to teach their kids and if anyone has read my previous posts you know where I stand regarding learning about finances from your parents. I know that the Ontario Government has recently expressed that they will be including personal finances in grade-school curriculums in the coming years and I think it can’t be soon enough.

All in all I think the changes are likely a good thing but are only part of the puzzle. If the Government broadens the scope of their efforts, they will have a much greater impact down the road.

If anybody has similar or differing opinions, I’d love to hear them.....


Tuesday, February 9, 2010

Variable or Fixed...what is the best option?

This is a question I hear A LOT. The answer is that there's no one-size-fits all solution — the ideal mortgage depends largely on your individual circumstances and risk tolerance.

A recent study found that 88 per cent of Canadian mortgage holders saved money by sticking with a variable rate over the past 10 years. But 68 per cent of Canadian homeowners have fixed-rate mortgages. Does this make sense to you because it sure doesn’t make sense to me. If there is historical data that proves one option performs better than the other, isn’t the choice logical?

I believe the biggest reason why the greater percentage of consumers have fixed rate mortgages, is conditioning. We’ve been conditioned by our parents to be conservative with our finances, especially mortgages and we’ve been conditioned by the banks to always look first at fixed rates.

I’ll start with parental conditioning, which has two elements. The first is that by and large, our parents (those that are 60+) were very conservative with their finances and that, if anything, is what they taught us. Now, it’s not their “fault” because that’s what was taught to them by their parents. These are people that lived through World Wars and the Depression, how could they not be conservative and how could that not trickle through the generations? My parents only ever had one mortgage (with a bank) and it was a 30-year mortgage. So, with all that experience, what sort of wisdom do you think they would have to impart on my first step into purchasing a home...go to the bank, the second element in parental conditioning that leads nicely into how consumers are conditioned by the banks.

Hopefully the way I refer to banks in this blog doesn’t lead people to believe I think banks are completely evil and that everyone that works for them are incompetent. On the contrary, I know a lot of people who work at banks and are very good at what they do. When I speak of banks, I’m talking in general and about the truths that I believe make up most of their practices. Having said that, go into a bank and ask them what their mortgage rates are and I’m willing to bet that a very high percentage of the time the first rate they will tell you is their 5-year fixed rate. Why? Is it because that’s the term and option they profit the most on, is it because it’s considered long-term and they know they have you stuck with them for 5 years or is it because that’s just the rate most people ask for so it’s the one they generally lead with? I believe it’s a combination of a lot of things. You can sort of see how it could just be a vicious cycle...we’re conditioned to go to the banks and they’re conditioned to lead with the 5-yr rate. Reality is the banks are in business to make money so they’re going to try to profit from you however they can, whether it’s through selling you their most profitable product or gouging you with high rates. My biased opinion is a mortgage agent is always a better option. We don’t profit from you, we’re paid by the institution we place your business with. Our role is to find you the best product at the best rate. My goal is a satisfied client, who I hope will come to me when it’s time to negotiate their renewal and refer me to the people they know. The banks don’t typically care if you threaten to leave them because they know that at the very same time, someone is threatening to leave the bank next door and will walk right in through their doors. I get that banks for some reason make people more comfortable and that’s fine, all I’m saying is if you choose the bank route, make sure they present you with ALL of the options and not just the 5-yr fixed rate.

On to the question of variable or fixed. Typically when I’m asked the question my answer is that it’s a matter of personal preference and tolerance. Then the follow-up question is what do I have. I usually hesitate to answer that question in fear it be perceived as advice. My role as a mortgage agent is to present all of the options, pros and cons and let clients make the decision that’s best for them. What I think is best for me and my family might not be best for you and yours. What I usually tell people is that it comes down to what will help you sleep at night. If you’re going to be completely stressed with a variable rate mortgage and will stay up worrying about it, then it’s not for you. If you feel easier with the idea of knowing what your payments are going to be for the next 5 years even though you MAY pay more in interest over that term than if you took a variable mortgage, then that’s the best option for you. A comparison I like to draw is with your investment portfolio. Is your portfolio mostly comprised of GICs, Canada Savings Bonds (like my parents advised me to invest in) or low-risk mutual funds? Then more than likely a fixed rate mortgage would be best for you. Do you hold mostly higher risk equity mutual funds or stocks? Then more than likely your risk tolerance would mean you can handle a variable mortgage.

The answer to the question of what I have is variable. It’s what works best for me and my family. Obviously I like the fact that variable rates are much lower than fixed rates at this time. Currently a 3-yr variable is as low as 1.85% whereas a 5-yr fixed is at 3.64%, which is still a fantastic rate. One of the things I prefer about variable rate mortgages is the flexibility. If for whatever reason I decide variable is not for me, I’d be able to lock into a fixed rate with no penalties. If I decide to refinance in order to consolidate debt, remove equity for renos or just take advantage of a lower rate relative to Prime, the penalty to do so, is a fraction of what the penalties are to break a fixed-rate penalty. Here’s an example, I recently had two clients looking to refinance, one had a fixed rate mortgage and the other had a variable rate mortgage. For the fixed rate client, the new mortgage rate would be almost 2% lower than what they were currently paying but with a $10,000+ penalty to break the mortgage, it didn’t make sense to do it. On the other hand, the variable rate client was paying Prime + 0.60% (2.85%) and by breaking their mortgage in favour of paying the going rate of Prime – 0.40 (1.85%), although they had to pay a $2500 penalty to do so, they stand to save $8500+ over the next three years.

If you want to talk about your own situation and what works best for you, I’d be more than happy to show you all of your options.


Wednesday, February 3, 2010

Mortgage Renewals – BEWARE OF BEING GOUGED!!!

Did you know that 84% of all maturing mortgages are renewed with the same lender? 84%!! I find that staggering. Why, you ask? Well, did you also know that at least in the case of the banks, the renewal notices that get sent to you as your mortgage is maturing do not quote their best rates? Surprised...you shouldn’t be.

Why would people renew at a rate that’s not the best available? It’s just like when you walked into the bank to get your first mortgage and the quote you were given was not the best rate. It likely required you to negotiate like crazy to get a rate that still wasn’t the best available. I know, I know, it’s just so easy to sign the renewal notice and send it back and that’s it. Let me draw a comparison. Take a professional athlete who is coming to end of his contract and will be a free agent. Does he simply sign on the dotted line at the end of his contract for whatever the team is offering? Absolutely not!! He tests the free agent market and entertains offers from the open market to find out who the highest bidder will be so he can make as much money as possible. More importantly, he gets an agent to do it for him. The same goes for the world of maturing mortgages. There is a very competitive lender market out there that desperately wants your business and is willing to fight for it. Consumers should be taking advantage of their free agency and that open market to get themselves the best deal possible and save money. And just like in the sporting example, there are agents who are willing to do the shopping for you to get you the best deal. The difference is our services are free to our clients whereas a sports agent charges a hefty fee to their clients.

If you have a mortgage coming to the end of its term in the upcoming months, give me a call so I can ensure that you’re getting the best deal possible. Just think...you don’t need to do any shopping, negotiating or accommodating the bank’s hours. I’m one phone call away, will do the shopping for you and come to you whenever it fits into your schedule.

Here are just a few of the rates I have available to me right now:

3 Yr Variable = 1.85%
5 Yr Variable = 2.00%
5 Yr Fixed = 3.74%

At the very least, keep yourself informed so you have as much leverage as possible if you decide to take on the challenge of negotiating with your bank.


Tuesday, January 26, 2010

To Refinance or Not to Refinance…That is the Question!

There are a lot of misconceptions about refinancing your mortgage…that it’s only for people who get into financial problems, that you’ll pay a BIG penalty to break your existing mortgage, that it will end up taking longer to pay it off and these are just a few examples.

The reality is that refinancing your mortgage is part of an overall financial plan to manage your debt in the smartest way possible in an effort to minimize the interest you pay and increase your wealth. I like to refer to it as actively managing your mortgage. Interest rates are at historic lows, if you’re locked into even a moderately higher rate, it might make sense to consider breaking your existing mortgage in favour of a lower rate. If you’re carrying high interest debt through unsecured lines of credit or credit cards, it might also make sense. We all have the best of intentions when we buy things on credit, “I’ll just make payments every month for the next year and it will be paid off”. Unfortunately, those good intentions are often not exercised and in most cases the debt continues to grow instead of shrink. Instead of losing the battle with those good intentions, it would make sense to consolidate that debt into your mortgage so that you do begin to pay it down and slash your interest charges. If you’ve been thinking about renovating a kitchen or finishing your basement, why not take advantage of today’s low rates to access some of your home’s equity to finance those renovations and increase its value.

Yes, in most cases there will be a penalty to break your mortgage, sometimes even a few thousand dollars and you will incur legal costs. However, if the savings is greater than the penalty, doesn’t it make sense to refinance? I have a client right now who is considering refinancing and although the penalty is a few thousand dollars, I’ve estimated the savings at five times that much. The penalty and legal costs are incorporated into your new mortgage so there is no immediate cash coming out of your pocket. I know what you’re thinking, “but if I’m just refinancing to take advantage of lower rates, I now have a bigger mortgage that will take me longer to pay off”. Wrong. Even though your monthly payments will be lower, so is your interest rate, therefore more of your monthly payment will be going towards your principal effectively negating the amount that was added to your mortgage. Also, a prudent move would be to take the amount you’re saving in mortgage payments and make lump payments to your principal further cutting the amount of interest you’ll pay over time and the length of your mortgage.

I don’t think managing your mortgage should be any different than your investment portfolio. I don’t know anybody who invests their money and then just sits back and checks up on it every five years or so. If you’re invested in a mutual fund or a stock that is not performing, you sell it and buy something that is. Constantly churning your portfolio in search of higher returns. Your mortgage should be handled the same way…constantly looking for ways to pay less in interest charges in order to increase your wealth and decrease your debt load.

You may not think you can benefit from refinancing, but maybe you can…greatly. Isn’t worth getting a professional to look at it with no obligation or cost to let you know if indeed you can be saving thousands of dollars? Take a look at your current mortgage rate or your high interest credit card rates with balances you’ve carried for more than a year. I have access to variable rates starting at 1.85% and a 5-Yr fixed rate of 3.64% just to give you a few examples. Likely the gap between the rates you’re paying and the above rates could be staggering and you could be saving a bundle.

If you’re interested in a free, no obligation evaluation, let me know. I’d love to help you save some money. It’s time to start actively managing your mortgage rather than sitting back and paying too much in interest.


Tuesday, January 19, 2010

Mortgage Brokers and My Mother....

When I started this blog, my intention was to create a place where friends, family, clients, etc. can go to get educational information regarding the world of mortgages along with my opinion thrown in a few spots. It is a blog after all. Never did I think I’d be mentioning my mother in a post, let alone in the title.

For those of you who don’t know my mother, she is a very conservative, very old-school...make that very, very old-school Scottish woman. To give you an idea, this is a woman who when she retired three years ago, swore to never touch a computer again because she doesn’t see the need for one. Now, even my Father-in-Law who refers to the computer as “the machine” sees its benefits even though he gets his wife to do all the dirty work for him. This is also a woman who said to me not too long ago, “they’re just getting so ridiculous with all these child-seat laws for cars”. Although she may reluctantly agree that sitting kids on your lap in the front seat the way she used to do it may not be the best way, surely they can just sit in the back seat with their seatbelts on.

You may be wondering where I’m going with this. I’m getting there. I’ve found when I explain my role as a Mortgage Broker to people of my mother’s generation, their response is varied but usually wrought with confusion. “That’s what the bank does”. Well, not really, the bank only has access to their own products with rates you need to negotiate whereas I have access to the products of over 60 lenders with discounted rates below what banks are willing to offer. “You deal with people that can’t get financing from a bank”. No, in fact most of the clients I deal with have stellar credit histories and could easily get financing from a bank. “How much do you charge people”? Nothing, my services are free to my clients. Some people I’ve spoken to look at me like they don’t understand that such a role exists. Reality is Canadians are very traditional when it comes to their banking and our approach just gets passed down from generation to generation. People of my mother’s generation were of the opinion that you go to the bank with your money and when you need money. This is evident in my mother taking me to the bank when I was six years old to open my first bank account and that ended my guidance on personal finances...you go to the bank. Things are different now and consumers have options. “Go to the bank” doesn’t need to be the way anymore. Over the last number of years Canadians have started to see they have more options than the bank as is evident by the growing number of people using Mortgage Professionals such as myself.

This past weekend I made a breakthrough that just about floored me. Every time I see my mom she asks me how things are going, still not fully understanding what it is I do. With each conversation she seems to get it a little bit more. So, while we were chatting she said, “why doesn’t everybody use a mortgage broker, it seems like such a better option than just going to the bank”. Answer...I don’t know. She might be a little biased right now but the point is, if someone as traditional in their thinking as my mother can have such a ground-breaking revelation, then there is growing hope that more Canadians can see the light too and start saving themselves time and money.

Here is a list of excellent reasons of why consumers could benefit from using a Mortgage Broker:

My services are free as the lender pays me a finder’s fee.

Access to interest rates that banks don’t tell you are available saving you thousands of $$$$. Since Dominion Lending Centres sends lenders millions of dollars of new business each month, they always offer us the deepest discounts, which I pass that on to you IMMEDIATELY - whether you are purchasing, refinancing or renewing.

I shop the market saving you time Calling me is like calling over 50 different lenders, including Banks, Credit Unions and Trust Companies – I have access to all of them so I can find you the best deal possible.

I don’t work for any one lender, I work for you!

Isn’t it time the Banks compete for your mortgage business? I’ll provide you with some options so you can compare the two – what your bank is offering you and what I am able to offer you, then ultimately you decide which you feel most comfortable with. It never hurts to get a second opinion on the biggest financial obligation you will probably ever have.

Our application process is simple and quick I’ll take some information and then send it electronically to the lenders that I feel are the best fit for your situation; 24 hr turnaround is usual!

Step By Step I’ll walk you thru the process of getting a mortgage step by step, especially if you are a first time homebuyer – it can be daunting.

I’m available on your terms Day, evening and weekends...and I’ll come to you.

Large range of products Such as self-employed, credit-challenged, no down payment, cottage/investment properties, line of credit, 2nd mortgages and more.

I appreciate your business I will go the extra mile to provide outstanding customer service so you have the best possible financing experience!

I am a Licensed Expert Deal with a mortgage expert specializing in mortgages from all lenders not just one.

Follow Up including Annual Mortgage Check-Ups and Variable Rate Updates. I’ll make sure your mortgage continues to meet your financial goals.