New Trends in the Mortgage Biz

Ok, now I’m starting to get the private lending sector and to boot, the new rules implemented recently in regards to cutting back amortizations, LTV’s on refinances and soon to be HELOC’s, the trend will certainly be towards private lender’s & alternative lender’s.

Realizing as well that these alternative lenders can offer pretty good rate options and even if their rates are high when it comes to second mortgages, well not too bad if you are  paying interest only for 1 year or maybe 2 until you have the equity to go to a prime lender for a lower rate.

Let’s put it this way, there is always a way!!!!!

GET YOUR HELOC’S

Get your HELOC’s

If your considering obtaining a HELOC or a readvanceable mortgage anytime soon wether it be to make a purchase, or refinance your current mortgage, you better act fast as the new OSFI rule becomes effective by October 31^st.  Some Lenders make their changes prior to the date of compliance set.

Why the urgency you ask?  Good question…. As of October 31^st you will only be able to obtain a loan to value up to 65% from the current allowable advancement of up to 80%.  Some Lenders will allow you to amortize the 15% difference between 65% & 80% within a mortgage and let you keep 65% in a secured line of credit.

This new rule will indeed further reduce the first time home buyers being able to qualify for a product of their choice.  Only qualified borrowers will be able to have access to this product as they may have the down payment or equity available to purchase or refinance their current homes.

In  case you are wondering the advantages of a HELOC and what it can offer you, see list:

Investment borrowing (using strategies such as the Smith Manoeuvre

Borrowing for education

Rental property investment

Value-adding home improvements

One-time debt consolidation

An alternative to higher-rate loans

A down payment source for a second property

An emergency backup fund

Also can be used for personal consumption like Tv’s Vacations & Boats.

Your Credit Score/Report

A good credit report and credit score are important factors in determining whether you will be approved for a mortgage. Following are some simple steps you can take to maintain a good credit history and improve your chances of being approved. What is a credit score? Your credit score is a number that illustrates your financial health at a specific point in time. It also serves as an indicator of your financial past, and how consistently you pay off your bills and debts. This is one of the factors mortgage professionals consider in qualifying you for a mortgage. Checking your credit score To find out your credit score, contact Canada’s two credit-reporting agencies: Equifax Canada at http://www.equifax.ca and TransUnion Canada at http://www.transunion.ca. For a fee, these agencies will provide you with an online copy of your credit score as well as a credit report – a detailed summary of your credit history, employment history and personal financial information on file. You can also obtain a free copy of your credit report by mail every year. If you find any errors in your report, notify the credit-reporting agency and the organization responsible for the inaccuracy immediately. Credit history It’s important to begin building a credit history as early as possible. You can start by applying for – and responsibly using – a credit card. Your financial institution or mortgage professional can help.

Boosting your credit Demonstrating your ability to manage credit is key to maintaining a good credit score. There are a number of things you can do to improve your credit score, including:  Always pay your bills in full and on time. If you can’t pay the full amount, try to pay at least the required minimum shown on your monthly statement  Pay off your debts (such as loans, credit cards, lines of credit, etc) as quickly as possible  Never go over the limit on your credit cards, and try to keep your balances well below the limits  Reduce the number of credit card or loan applications you make once your credit score has improved, work with your mortgage professional to obtain a mortgage that works for you. To find out more about credit scores and reports, visit the Financial Consumer Agency of Canada website at http://www.fcac-acfc.gc.ca and download or request a free copy of their guide Understanding Your Credit Report and Credit Score. This guide provides practical, straightforward information on how to obtain and understand your credit report and score, as well as how to build and maintain a good credit history.

Muliple Down Payment Options

With interest rates still hovering at all time lows – with no where to go but up – now is an ideal time for first time homebuyers to embark upon ownership.

But if low interest rates still don’t tip the scales on your decision to enter the property market, perhaps the information below will.

Down payment

The main reason many renters feel they can’t afford to purchase a home has to do with saving for a down payment.  But there are many solutions available today that can help first-time buyers with their down payments.

Many lenders will allow for a gifted or borrowed down payment. And of those lenders that will not provide this alternative, many offer cash-back options that can be used as a down payment.

Better yet, there are programs available from some financial institutions where they will offer a “free down payment” or a “flex down”. Of course, you will end up paying about 1% more in your interest rate, but the program will help you get in the homeownership door and start accumulating equity earlier. The only catch, however, is that you must remain with the original lender for the full initial five-year term or else you’ll have to pay the down payment back.

Under the RRSP Home Buyers’ Plan, first-time homebuyers can withdraw up to $25,000 from

their RRSPs for a down payment – tax- and interest-free.

And if there’s a couple making a home purchase together, they can each withdraw up to $25,000 from their RRSPs.

Making an informed decision

There’s an endless amount of information available to prospective homeowners – through the internet, friends, family members and anyone willing to voice their opinion on a given subject.  What you need, therefore is education and coaching as opposed to being bombarded with more information.

That’s why it’s important to speak to a real estate agent and a mortgage professional in order to get a preapproval prior to setting out home shopping. This will help set your mind at ease, because many first-time buyers are overwhelmed by the financing and buying processes, and often don’t know what it truly costs to purchase a home. Real estate and mortgage professionals can provide you with real examples that can go a long way in showing you what it really costs to buy a home in your area versus what you’re currently paying in rent.

You may be pleasantly surprised by how manageable it is to start building equity in your own property as opposed to helping pay someone else’s mortgage each month!

Canada Housing Market – Aug 2012

Canada Housing Market – Aug 2012

There have been two reports out recently, one stating that Condo prices in the GTA will drop by 2% to 7%  whereas another report came out stating the entire Canadian housing market  and not just GTA condo’s will have a 25% decrease in price.  This is not surprising due to the recent Government policy changes, along with consumer’s being reluctant to pay historically high prices in light of the current global economy.

First Time homebuyers will be affected the most by the new Government changes to insured mortgage products, yet they are 50% of the buyer’s out there looking to purchase homes.  Not to mention the speculation of interest rate hikes.

It is not surprising that we may reach a bubble if not already.  In my own residential neighborhood there are more for sale signs up then I’ve ever seen, yet none of them seem to be selling????  Personally I feel they are all overpriced, but hey if they sell, then my property goes up in value.    I know summer can be slower than Spring & Fall for the housing market, but this is the first summer I’ve noticed so many just in my own area.

I really hope things look brighter in the Fall.

No Downpayment, No Worries, 100% financing is here, so why Rent?

Calling all Renters out there who think that owning their home is impossible?  It is not with mortgage products out there, where you don’t need any downpayment.  The rate may be higher than available if you did have a downpayment, but it may be very worth it to you to own your own home instead of paying someone else’s mortgage payments and not having an asset to show for your $$ going out in to never never land.

Give me a call at 905-906-5191 or email me at kerickson@morbridge.com to see if your dream of home ownership can come true.

Cheers!

Kathy

Mortgage Market Update

In the past I usually provided educational blogs for consumer’s.  I am going to start blogging about the current market as there are new changes constantly and definitely Lenders are moving in a more conservative direction tightening up on their guidelines.  However the reason Lenders are doing this, is more to do with it coming from their regulator OSFI (Office of the superintendent Institution of Canada). This is going to make it a tougher market, especially for first time homebuyers and business for self individuals to obtain a mortgage.  As most recently, there is talk about Lenders pulling back on reducing the loan to value from 80% to 65% on their secured LOC products (HELOC’S).  I guess it wasn’t enough to reduce amortization, no to low income documents for Business for Self Individuals.  In saying this, on the up side, it is good that consumers are not able to get in over their heads in debt which they may never be able to pay off, or worse yet, have to declare bankruptcy and go through heartache and stress due to their debt load and possibly having to lose their homes.

This is definitely a time for consumer’s in the market looking to  purchase a home, or refinance their current home to obtain a professional mortgage broker who can help them save time and money.  Mortgage Brokers have access to many Lenders and their products and know which Lenders still have products which will suit your needs without you having to take your precious time to shop and receive rejections or higher rate prices in order to qualify under their new guidelines.

Market Update

As of March 20th,the Canadian real estate market is moving into its busy season and there’s a lot of chatter about the state of that market. In the past week we were told home ownership has become more affordable in Canada. A cooling in the Vancouver market takes most of the credit but increasing incomes and low interest rates also figure into the equation.
Low interest rates and the current mortgage wars continue to drive concerns that home buyers will over extend themselves. The federal government and the Bank of Canada continue to warn that the ratio of household debt to income remains too high. That ratio did come down slightly, but that too is credited to rising incomes, not declining borrowing.
At the same time the Canadian Real Estate Association predicts average home prices will fall 1.1% this year, to an average of $359,100, before rebounding 0.9% in 2013.
As of today, the Lenders are raising their rates as much as 20 bps up and almost all have stopped their rate special for the 4 yr at 2.99%.  The trend is for client’s to choose fixed rates over variable now due to the fear of rising interest rates.

Home Buyer’s Plan – RRSP’s

DID YOU KNOW…

The Home Buyers’ Plan (HBP) is a program for first-time homebuyers that allows you to withdraw funds from your RRSPs to buy or build a home. You can withdraw up to $25,000 tax-free ($50,000 for a couple). Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP. Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. You’ll have to repay an amount to your RRSPs each year until your HBP balance is zero. If you don’t repay the amount due for a year, it will have to be included in your income for that year. Click here for more information from Canada Revenue Agency.

Improved Mortgage Penalty Disclosures

Going forward, federally regulated financial institutions must disclose the following to borrowers:

1. The method (formula) for calculating the exact prepayment charge in language that is clear, simple and not misleading Where the penalty formula is complex (e.g., uses present value), a simple way to estimate penalties.  A description of all inputs used in the penalty formula (including things like posted rates at originations, future value, outstanding balance, all applicable interest rates, bond yields, etc.)
2. Information on how to obtain each of those formula inputs (or the actual values themselves)
3. An example and/or worksheet  to help consumers figure out their own prepayment penalty

Federally regulated lenders must be in full compliance with the above by November 5, 2012. The Financial Consumer Agency of Canada will monitor that compliance on an ongoing basis.

In addition to better penalty disclosure, lenders must also provide the following to customers annually:

• A description of the borrower’s available prepayment privileges
• The dollar amount of available prepayment options
• Explanation of factors that could cause penalties to change
• Specific information needed for the borrower to calculate his/her own penalty (e.g., the rates used to   calculate the penalty, balance, etc.)
• A list of all other fees for early repayment
• Contact information for lender staff knowledgeable about penalty calculations.

Upon request, the lender will have to furnish a written statement with the prepayment penalty (and other amounts) to be charged, with a full description of the formula used and the timeframe for which the penalty quote is valid.

Lender will also need to provide guidance on what triggers a penalty, how to avoid penalties, and how pay down principal quicker without incurring penalties.

And lastly, lenders must post calculators on their public websites to help determine “reasonable” estimates of penalties. No more guestimators that provide ballpark penalty quotes that are thousands of dollars off.