May
08
Scotiabank Won’t Help You Pay Your House Off Faster: YOU Will
I’m tired of seeing the ads on TV and in print about how Scotiabank or BMO can help you pay your mortgage faster. In one particular one a couple sits on their couch and scratches their heads when they see their mortgage statements, and say “I wish we could pay our mortgage off faster” which clips to a big blue room (presumably heaven) where the BMO rep says “oh but you can!”.
Well, duh.
Of course you can pay your mortgage off faster but have BMO or Scotia or TD ever mentioned that the penalties they charge are amongst the highest in the industry IF you have to break your mortgage sooner (rather than pay it off)? No - they don’t mention that. Anyone can pay their mortgage off faster by taking advantage of the pre-payment options (which almost every lender has, ranging from 5% of the balance to 25% as in ING’s case). It doesn’t take a big bank to tell you why you can do it or how you can do it, it is up to you, the borrower, to do it.
Here’s a tip:
If you’re a first-time borrower locking in at today’s rock-bottom rates, pay your mortgage AS IF you were paying at rates from a few years ago. A $400,000 mortgage at 2.89 carries for $1870 per month. If you pay as if you’re borrowing at 4% for example, that payment jumps to $2104, or $234 more per month. But, your mortgage balance at maturity drops from $341K to $326K. Better still, if you do this then at maturity if rates get to 4% (a very realistic figure) then your payments will continue to be lower not higher than at 2.89%.
This is key: lower payments at maturity. I believe too many first-time buyers are…
Apr
18
I Hate This Question
As a broker who takes a lot of calls from a lot of different people, I can tell you honestly that the worst question to answer is this: “What’s your best rate?”. Not that I don’t like talking rates over the phone or in person, I do. Matter of fact these days I love talking rates because of how low they are and will continue to be. That being said however, the question bothers me because it shows me that many people still don’t get that rate is such a far and wide question it is impossible to answer straight up. Let me give you another example: when buying a car do you call a dealership and say “what’s your best price?”. No. The dealer would obviously ask you what kind of car are you looking for? SUV? Sedan? Coupe? Used? New? Lease? Buy? You get my point, right? Just like with buying a car, shopping for a mortgage is equally complicated when deciding what term to pick and what terms to go for. Example: do you want to have the option of prepaying more or less per year? Do you want portability? Do you care how your IRD is calculated? Are you comfortable with a lender or a bank? Do you know how the new mortgage rules will impact your future buying decision(s)? Are you looking for a lender that will allow you to refinance or better, leave without selling? See! There’s so much more to talk about than just “what’s your best rate?”.
By the way, call me and I’ll tell you my best rate. 
Apr
07
Disaster Story - What Happens When You Choose The Wrong Lender
My happy couple just announced they were having a new addition to their family so they went out and started house hunting. We assessed their current mortgage situation (3 years left at 3.89% with a Big Bank) and found out the penalty would be $10,000 to break. They were going to increase their mortgage by $150,000 to move into the ideal long-term neighbourhood and pay off all their consumer debt. New house, new beginning, new financial plan. Luckily they found a place and won their bid with little competition, and then sold their home in 3 days (a record on the street). Mortgage approved and everyone is happy…
.....until rates dropped by a tiny amount and their penalty shot up by 60% to $16,000 from $10,000. Can you imagine? a .20 basis point drop and the penalty goes up by 60%? Suddenly we’re in trouble: my clients don’t have the extra $6K lying around and even though their 5 - year savings would be greater than $16,000 we decided to re-approach their current lender to stay there and blend their mortgage.
HOWEVER (and here’s where it gets fishy)
The lender my clients chose before does not blend and extend but rather will only blend and keep the existing term. Not a problem in most cases but under the new mortgage rules if you want a mortgage that is less-than 5 years in length you have to qualify at the posted rate of 5.14% (today), and not the discount rate of 2.89 (a typical 5-year rate). But wait it gets better trouble is my clients do not qualify at this rate and are now faced with HAVING TO pay $16,000 regardless whether they stay at their existing bank or not!
Unscrupulous!
I jump into action and try and figure this out…
Mar
20
Look How Many Times Garth Turner Is Wrong
Today I had the pleasure of reading this full-of-holes blog on the internet by Garth Turner, a post that I will counter with my own bold points.
Garth says:
In the first two weeks of March real estate deals in Toronto were down 11.5%. Sales of single family homes dropped about14%. This is consistent with every other market in Canada. Year/year transactions have plunged from single digits (Calgary) to a withering 40% (Lower Mainland). There is not a single major city or province where the pattern has been breached.
This is spring, and mortgages are 2.99%. Go figure. As night follows day, lower prices trail falling sales. Especially in 2013.
That’s funny because the City of Toronto keeps experiences rising prices in Real Estate.
So why would anyone empty their bank account and chunk up on debt to jump in now?
One main reason is that we are at all-time lows for mortgage borrowing costs. One other thing that dear old Garth doesn’t advise is to pay at much higher rates. Something I advocate heavily to protect yourself against rising rates, something we may not see until at least end of 2014 says Bank of Canada.
He continues with “Laura”, surely a figment of his imagination because I could NOT imagine any sane woman or man writing to Garth for advice. But I digress… Let’s continue!
Ask Laura.
Garth, we really need your help. The area of Toronto that we live in is expensive regardless as to whether or not you want to rent or own. We are busting out of our rental apartment and need to move to at least a 3 bedroom home with 2 bathrooms.
I know you have always written that renting is better, but I cannot find a 3 bedroom, 2 bathroom rental in…
Mar
15
Why I Hate Mortgage Life Insurance
Ok, let’s face it. You were smart enough to work with me, your mortgage agent. You knew I brought many benefits to the table that the big banks don’t - knowledge of the products, access to various lenders, and great rates and service. But then you want to buy my life insurance? Really? Full disclosure: I get paid if you do so I shouldn’t be complaining should I? Truth: You couldn’t pay me enough to like and stand by the product enough. I’ve always believed the most successful sales people are the ones who believe in the product they sell. If you asked me to sell lids to coffee shops I couldn’t, because I don’t care. For some reason I was fortunate enough to start in this business ten years ago and having visited so many buyers and being part of their improvement in net worth AND quality of life has made me realize I’m the luckiest person to have this as a career. All that being said I stop the train at mortgage life insurance and here is why:
First it is a post-claim underwriting product. What that means is that you fill out the form, in most cases don’t get checked by a nurse, and then if something happens do they start the underwriting. No thanks. I want to know going into a life insurance policy where I stand, not after my spouse has passed away. I know life insurance in itself can be a nightmare to go through a claim so why have the added stress?
Second, the mortgage balance decreases while your payments remain the same. Tell me one other investment where your balance decreases and your payments remain the same. I’m not talking about the stock market because we all know that can go up…
Feb
28
Lenders You’ve Never Heard Of But Are Good For You
This past weekend one of my longest-standing friends, Ken, got married. I was at the wedding and we got to talking about what we all do for a living (which is inevitable at any wedding) and the topic of mortgages came up. When someone asked which banks I favour I said “oh, those you’ve probably never heard of” until the guest told me where his mortgage was and then I had egg on my face - it was one that he “probably never heard of”. Lucky for him he was smart enough to go with a mortgage broker or agent and not head to directly to the bank for his options. However, chances are that most people have never heard of: First National, MonCana, Merix Financial, Lendwise, MCAP, CMLS, just to name a few. Why? These are what we call in the industry monoline lenders. What that means is that they lend directly thru brokers only. Some have been around forever, some have just recently started, but all come with the financial backing of big-time heavyweights (whether a combination of big-bank funding, investors, pension funds and the like). I often times wonder why people are so overly concerned about who is lending them the money (as opposed to the lender being concerned who they are lending to). Yes the Great Big Financial Crisis of 2008 did put a few people out of business down south but since then we’ve had four major mortgage rule changes in Canada completely eliminating any “exotic lending” that was available here for a very short time. To put those concerns at ease I wanted to write about these Lenders You Have Never Heard Of But Are Good For You.
In the mortgage industry we hold about 25% of the market. Not a huge number but…
Feb
25
Don’t Sweat The Small Stuff
Sometimes, not too often, but sometimes clients of mine get agitated or annoyed about the conditions of a mortgage approval, and ask me “why do they want that?”. It’s a natural reaction, as our private financial affairs are just that - private. However when borrowing hundreds of thousands of dollars I have to say: don’t sweat the small stuff. My role as a mortgage agent is that I’m supposed to act on both the lenders behalf and yours, the borrower. As a result I’m put in the middle between you two and have to reasonably expect that there will be demands placed by either side, and manage those expectations and demands. I try and minimize the amount of documentation needed to make the life of a consumer easier, and NOT to “hide” things from the lender. I know what it is like to amass documentation and that’s why I always say to prepare everything in advance, but reality is that it’s rarely done this way.
Some examples of conditions the lenders may ask me for include:
Adding a T4 or two, or two years’ Notice of Assessments. This holds true especially for hourly-wage income earners. Typically we use a 2-year average for these kinds of clients and as such the lender may ask for back-up of income.
Proof of where down payment comes from. This is a BIG one lately. Some lenders ask for proof of large deposits by way of more statements from the giftor, if it is a gifted deposit. This means you have to ask your parents or giftors to go to their bank and get 90-days history of statements from their account, even when not on the mortgage! Anti-Money Laundering Legislation is the reason behind this, and rest assured it is in-line with reasonability.
So, my…
Feb
15
How To Win A Bidding War
They’re baaaaaaaaaaaaaaaaaaack!
With regret I inform you that bidding wars are happening with more regularity than Jim Flaherty wishes. In hot areas like Roncy, Bloor West, Junction, Leslieville and Riverdale, bidding wars are spiking up home values faster than the snow piled up last week. That’s not to say they will continue but in the short-term, while lending rates remain rock-steady and in the basement, and inventory is extremely low (quality inventory, that is), bidding wars are a fact of life in the Toronto market.
As a seasoned mortgage agent I get many calls from first-time and repeat buyers who are frustrated that this is happening. I have a young couple who just sold their condo through the tough Christmas market and were outbid by $50,000 on a townhouse, where the identical unit sold for only $75,000 less just 8 months ago. I have another amazing couple who earn a great healthy income but because of the new CMHC rules cannot borrow more than a million bucks, even though they can afford to pay off $1.5M. I have a third couple who are renting and biding their time, have been outbid a few too many times and are sitting and laughing with tears. Are those tears of joy? Probably not.
Worry not though! Bidding wars can be won but I have to give you a step-by-step scenarion of how:
First - when entering a bidding war, always always always get pre-approved beforehand to know how high you can go, and never ever ever go as high as your absolute limit. Reason being in today’s lending market you may be surprised to find out that even though the rules state you may borrow up to a limit, the underwriter(s) may disagree. Always leave a bit of a cushion when…
Feb
06
Self-Employed Borrowing
Ever since the mortgage rules have changed there has been an increased pressure for self-employed borrowers to shore up their taxes and declare more income (thus, pay more tax). There are three insurers that lend on self-employed applications but the rules (both official and unofficial) differ, so it’s important to know where to go based on your situation.
For example, CMHC will insure self-employed borrowers but will only accept “stated income” applications (which differ from their actual tax return numbers) if the client is self-employed for less than three years but more than two years. So essentially if you’re self-employed for three years or more you’re having to prove your income via tax returns and line 150 on your Notice of Assessment. In reality this rules out a great majority of borrowers so CMHC is not the best route to go if you’re self-employed.
Genworth, on the other hand, does not have a limit or parameter as to when you can be self-employed. You could have been self-employed for more than three years however there must be a cash-component to your business. This is something that is so against logic that it really bothers me as a mortgage agent. How could Genworth explain to me that a mechanic that earns say $60,000 a year gross, but needs $100,000 per year to qualify and has a cash component can qualify, but someone like a lawyer who does not have a cash component does not? Genworth claims they will look at every file independently but through experience I’ve realized that the cash component part is very important to them.
Canada Guaranty follows both CMHC and Genworth rules, but you must be self-employed for at least two years or more. Canada Guaranty offers 5% down for self-employed applications but CMHC and Genworth…
Jan
17
The end of ING (for now?)
It’s a sad day when a lender leaves the broker channel. We represent about 20-28% of mortgage originations in Canada, a number that’s far too low in my opinion. I understand the allure of having “everything under the same roof” but the problem with that thinking is you don’t open yourself up to other financial opportunities or offers that may end up saving you loads of money. Yes, free banking for a year may seem like a great deal, “Hey Honey! We just saved $16 a month at the bank because we took our mortgage there!”, but wait until you get your IRD payout from that bank and the conversation will go more like “Hey Babe! We can’t afford that furniture for our new house because we are paying $17,000 to break a $220,000 mortgage! But we got free banking!”
But I digress..
Back to my original point. When a lender leaves the market it’s never a good thing. Earlier when Scotiabank bought ING Direct, everyone was told it would be business as usual and Scotia would run the brand separately. Well, obviously things changed very quickly and a lender that gets over 80% of its customers from the broker channel decided that it doesn’t jive with the parent company’s strategy and would rather get those customers via the internet and call centre banking. Good luck, I say.
First off, I have heard many painful stories of how a call centre (usually untrained or undertrained employee) would offer a product that that lender cannot actually close on. They boost your hopes only to let you down when it matters. Do you want to see whether you qualify for a $500,000 mortgage on the phone? Or would you rather have a coffee, a sit-down and chat about your plans goals and…
Categories /
Monthly Archives
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- September 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
