Mortgages.ca

blog, Home Ownership, Mortgage News, Mortgage Refinance, Uncategorized

Urgent Message on Mortgage Rates

As many of you may have seen in the media recently:

 

“Rates are going up,” and “Mortgage rates have to go up.”

 

We all know the media tends to focus on the negative – but rest assured, rate changes are nothing new for us as Mortgage Brokers, and this news does not change our client recommendations.

 

Is inflation high right now? Yes. But for the Bank of Canada to even consider raising the prime rate, we’d need to see sustained inflation for 6+ months to move the needle in any meaningful way.

 

For reference: a 0.25% increase in the prime rate = $12 increase per month per $100,000 mortgage borrowed.

 

Below just a few of the many reasons to maintain your variable rate mortgage – or refinance and get a new variable.

 

 

1) The primary reason: Once you lock into a fixed rate, your future potential prepayment penalty goes up 900% on average.

 

No client plans on breaking their mortgage, but over 70% of Canadians do for one reason or another, and over 85% of Canadians will either move or refinance every 3.5 yrs. In other words, the probability is high. Simply put, life happens.

 

2) If you lock in, you are self-imposing a rate increase that is 4 times greater than any Bank of Canada rate increase, as the average fixed rate is 1.00% higher than variable on average.

 

3) The prime rate would have to go up 9 times in the next 5 years for you to lose money comparatively (when comparing fixed to variable today).

 

4) If you are concerned about your payments going up, give me a call. We can lock into a variable rate around product 1.20 to 1.45% with a fixed payment 🙂 Win-win. We are happy to help with that at Mortgages.ca.

 

5) If you think that the prime rate will go up, simply increase your payments now (maybe $200-300 a month). This way, you are paying off principal instead of interest while you wait, and you maintain the FAR superior terms and conditions of the variable product!

 

Pay off your mortgage (ie: put it in your pocket – not the bank’s profit margin).

 

6) The Banks/lender will call you to fear monger you into locking in your variable rate to a fixed within weeks of any prime rate increase:

 

Why? Because it is what is best for them, not you. The fixed rate is more profitable for the banks, especially the 5-year fixed.

 

Don’t get mad. They are a business, and a very successful one at that. Just buy more of their stock and enjoy the dividends.

 

The prime rate goes up and down – not that often, but it happens. The bottom line is that those who take a variable rate mortgage, pay less total interest than those who go fixed (every time for the last 50 years). PLUS they benefit from far superior terms and conditions – if life happens.

 

Life is Variable – Your mortgage should be too!

 

Stay strong – and stay the course 🙂

 

blog, Home Ownership, Mortgage News, Uncategorized

The ABC’s of Private and B-lending

The ABC’s of Private and B-lending

 

When it comes to securing a mortgage, most of us might think big banks are the only option. But what happens if those household-name financial institutions turn down your mortgage application?

 

The good news is dreams of home ownership, refinancing and/or debt consolidation don’t have to be put on hold. B-lending and private lending may be options when prime lending isn’t.

 

What is B-lending and Private Lending?

 

B-lending and private lending are alternative sources of mortgage financing for people who have bruised credit, or are purchasing or renewing a mortgage on a property that’s not in a prime location or may be designated mixed-use. B-lenders are major institutional players in the mortgage industry. They’re generally more forgiving of poor credit, approving mortgages for one- to three-year terms.

 

“If you don’t fit into A- or prime lending, we look to B-lending,” says Vern Bovell, mortgage agent with mortgages.ca. “It takes a short time for your credit score to take a hit but it takes a long time to bring it back up. If you have bruised credit, it takes one to two years to rebuild, and hopefully by then, we can put the client back into prime lending.”

 

Private lenders are individuals or mortgage investment companies who lend money based on the property, not the client. So if a person’s job status is in flux, it’s not a consideration for approval. “They want to know the condition of the property, the location of the property and equity on the property,” Bovell explains. “The more equity you have, the more likely you have a deal.”

 

Like B-lending, private lending is only temporary. Terms are typically one year. Conditions of a private mortgage include a fee for the loan, payments each month, plus interest at rates that are slightly higher than prime rates. That one-year private mortgage ultimately buys a client time to either improve their income status or sell the property, Bovell notes. After that, the loan is paid back and the homeowner ideally moves back to the prime lending space.

 

Who can apply for B-lending and Private Lending?

 

Candidates for these mortgages include borrowers whose credit rating has been affected by a previous bankruptcy or consumer proposal, or missed or late credit card and loan payments. Those with “unprovable income” would also be eligible for mortgages from alternative lenders. That includes people who are self-employed with a lot of write-offs, in the early years of their startup and lack a long enough income history for approval, and those earning lower incomes or who are often paid in cash.

 

The best way to determine which lender is best for you, however, is to connect with a qualified mortgage agent. “When certain criteria aren’t met, a client won’t qualify for prime lending,” Bovell says. “But I can have a conversation with alternative lenders who may provide a mortgage and that’s a definite benefit for borrowers.”

 

blog, Home Ownership, Mortgage News, Uncategorized

Get to Know Our West Coast Team

Matt Imhoff Has Always Liked Numbers and Math

 

The mortgage broker at our mortgages.ca Vancouver office is also a big fan of planning and helping people with the big decisions in life. Take purchasing a home, for example.

 

It all makes Imhoff the ideal person to lead the mortgages.ca team, now three strong and growing, on the West Coast.

 

“I’ve always been a planner and when you have a finger on the pulse of when decisions need to be made, I can help my clients with the bigger things,” Imhoff says. “It’s really about quarterbacking the whole purchase process and feeling more confident in what you’re doing by being aware of everything.”

 

Canadian Industry Leaders in Your Backyard

 

Imhoff, who’s licensed in British Columbia, Manitoba and Ontario, thrives on knowing what’s going on in the industry. When he’s not helping clients find the right financing for their home, he’s sharing his knowledge with other mortgage brokers in an effort to better them and the industry as a whole.

Imhoff’s knowledge is often tapped into by Mortgages Professionals Canada, which has hosted him as both a guest speaker and panelist in their continuing education courses.

 

He also has a knack for finding and developing talent. In the short time our Vancouver office has been operating, Imhoff has added two additional brokers, Eddie Han and Adam O’Neil, to the team. Both bring with them the extensive and diverse customer service experience that clients have come to expect from the mortgages.ca team.

 

The team will expand again soon with another new broker who is in the final stages of the licensing process. Imhoff is currently scouting and coaching others to join our B.C. office. Together, they’ll help residents achieve their dreams of home ownership and support our Ontario office when people living there are looking to move or expand their real estate portfolio out West.

 

“We’re putting together a strong team with people who always put the client No. 1,” Imhoff says. “They focus on breaking things down in a way that’s easy for our clients to understand. This is about expanding and having brokers licensed in the province you’re living and working in.”

 

The Benefits of Working With a Local Broker

 

It’s advantageous to work with someone who, quite literally, knows the lay of the land, he added. That could be knowing Vancouver’s neighbourhoods or, on a larger scale, the geography of B.C. right down to when and where potential threats to deals, including this summer’s devastating forest fires, are happening.

 

“It’s being aware of these things and doing extra due diligence versus a broker who doesn’t know the area and can put the client at risk,” Imhoff says.

 

What it comes down to is taking care. And that’s what Imhoff and his team do best.

 

“It’s not about me and what I’m making in commission,” he says. “It’s about (clients) and are they being taken care of? I want any interaction, big or small, to be positive. I’m on their team regardless of which direction they go.

 

“This isn’t about a transaction,” he adds. “This is a lifelong relationship in which they know they can trust me to help them.”

 

Upcoming Mortgage Professionals Canada continuing education course featuring Matt Imhoff of mortgages.ca:

 

Mortgage Professionals Canada 2021 Fall Virtual Mortgage Symposium, Oct. 13 and 14, 2021

 

Everything you should know about Prepayment Penalties Pt. 2

 

blog, Home Ownership, Mortgage Education, Mortgage News

Cameron Miller Q&A

There’s no question the pandemic has changed the real estate market in the Greater Toronto Area.

 

We’ve asked some of our real estate partners how the market has adapted in the past 15 months, and what advice they might have for homebuyers and sellers in this new normal.

 

Who: Cameron Miller

 

Title: Sales Representative, property.ca Realty Inc.; cameronmiller.ca

 

Area: Downtown Toronto

 

Specialty: Condos, pre-construction and re-sale

 

What are some of the changes or precautions we’re seeing taken in the home-buying and selling process right now at this point in the pandemic?

 

Something that has changed is virtual showings. So when sellers are showcasing their property online, they need to have those virtual tours with their listing. A lot of my clients have bought apartments off of a 3-D tour. It’s nothing that’s going to disappear anytime soon. Buyers need to get comfortable with buying virtually because that’s just the world we live in with COVID.

 

What do you need to keep in mind when doing these virtual tours? For sellers, how do you have a really great virtual tour?

 

We need to make the space look as optimal as possible. How do the buyers envision their living room? They want to know where their TV is; they want to know where their couch is. They want those ideas. So a property that’s a one-bedroom condo that’s catered to a guy that’s going to live downtown, you want to stage the property to attract that type of buyer. And in the virtual tour, it’ll show.

 

So on the flip side, when you’re a buyer, any tips or things to pay attention to, especially if a property doesn’t translate well to a virtual tour?

 

Virtual tours don’t usually tour the building. So I think if you’re speaking about a condo, doing research on the building is very important. What amenities do they have? How many people are in the building? Who is the property manager? What’s the track record of the property manager? Things like that. It’s important.

 

In the news, we often hear the terms seller’s market or a buyer’s market. Can you tell us what those mean?

 

A seller’s market is when there’s more demand than listings, so there are fewer sellers than buyers. That means buyers are competing. A buyer’s market is the complete opposite. It’s when there are more sellers than buyers. We saw that in the rental market last year. The rental market was not plummeting, but doing sort of a nosedive. And it was very much a buyer’s market, or a tenant’s market.

 

Has there been one type of market in particular that’s dominated during the pandemic?

The cottage market has dominated during the pandemic. It seems like people want more space and appreciate sanctuary living rather than high-density living in the city. Areas like Muskoka, Collingwood, Blue mountain, etc., have experienced tremendous growth in the past year.

 

Is that still the case or has it switched at all?

I’m noticing in the rental market, it’s definitely stabilized. Buying and selling, there was a time where it was more of a buyer’s market than a seller’s market. It was a very brief time last year that that happened but it went back to a seller’s market very fast. Listings started disappearing very quickly, especially January to March of this year.

 

The cottage market continues to boom as people’s needs for a home away from the city continues to grow.

 

Where are things at right now?

Right now it’s an interesting time. Things have cooled down since the first quarter of the year. But maybe buyer fatigue has set in, where buyers are tired of going over asking (price). In the condo market, Listings have increased, demand has slightly dropped but prices have stayed, so we’ll see what happens.

 

What are some words of wisdom or advice you have for a first time home buyer?

Understand the process because the market — and I’m specifically speaking about the downtown condo market — it’s competitive. That means they would need their ducks in a row beforehand. They need to get pre-approved (for a mortgage). They need to understand the process, and they need to have a deposit check in hand. They need to review the status certificate beforehand, know who their real estate agent is, and know who their lawyer is.

 

What are your thoughts on the post pandemic real estate market? We often hear about pent-up demand. Is there going to be a correction or will it be full steam ahead?

Nobody has a crystal ball with these things but Toronto Real Estate Board Chief Market Analyst Jason Mercer said prices will probably continue to trend upwards as the city starts to grow and things start to open up. We didn’t really have a big population growth last year. But the population continues to grow and the supply continues to shrink when the people who come here absorb it, so prices are probably going to grow.

 

blog, Home Ownership, Mortgage Education, Mortgage News

The Property Shop Q&A

The real estate market is nothing if not fascinating to watch right now.

 

But for those wanting to be more than a spectator, we’ve asked some of our real estate partners how the market has adapted in the past 15 months, and what advice they might have for homebuyers and sellers in this new normal.

 

Who: Vanessa Jeffery and Joe Baglieri

 

Where: Re/Max Property Shop

 

Area: Eastern Greater Toronto Area (Scarborough to Durham Region and north to Markham)

 

Specialty: A high-level, client-centred experience developed through a combined four decades in real estate.

 

What are some of the changes or precautions that we’re seeing taken in the home-buying and selling process at this point in the pandemic?

 

Vanessa: We were well prepared to pivot to virtual consultations as we were doing them for the last year with many clients who were not able to meet in person. For buyers, our preliminary consultations were done by video, to determine their needs, their criteria, and talking about the buying whole process. For our sellers, we gave them the option of taking a walk through their home virtually and being able to have that initial meeting (virtually), including the consultation with our stager to get a head start. With showing homes, because we were an essential service from the beginning of the pandemic, we were still allowed to do in-person visits. A lot of our clients still opted to do in-person showings but we had a COVID screening protocol. We also encouraged our buyers to explore options like virtual and 3D tours to make sure that it was a right fit before we actually went and met in person.

 

In the news we often hear the term “seller’s market” or “buyer’s market.” Can you tell us a little bit what that means?

 

Joe: When they refer to buyer’s market or seller’s market, one thing they’re missing is a balanced market.

 

We are basically looking at the rate that homes are selling, or months of inventory (MOI). This ratio represents the number of months it would take to completely sell all the homes that are currently for sale, based on the area’s current rate of sales activity, assuming no new listings were added.

 

A seller’s market occurs when the MOI falls at or below four months; in a balanced market it falls between four and six months, and a buyer’s market is when the MOI is more than six months, where buyers can have more selection and negotiation power because there’s this constant supply of properties coming on the market.

 

Has one type of market in particular dominated during the pandemic?

 

Joe: It’s been a seller’s market for a while now. In the pandemic, a lot of people squatted in the real estate market at first to see what would happen. However, there was a lot of necessity purchase and sales — people that sold and had to buy, or people that were just given notice from their landlord and needed to buy. Inventory levels were at an all-time low, and there were many people that needed to buy. It’s been like that until now.

 

Vanessa: Another major factor why there’s been a seller’s market is that interest rates have been record-breaking low. People have realized instead of us renting, it’s time for us to jump into home ownership. So from the beginning of the pandemic to now, we’ve been in a seller’s market.

 

What are some words of wisdom or advice that you have for a first time home buyer?

 

Joe: Finding a good realtor and finding a good mortgage broker is really imperative to having a smooth transaction. For many years, people didn’t use the same realtor twice because of the overall experience and feeling at the end of it all. The Property Shop’s mission is to give an exceptional experience from start to finish. It’s about getting them where they need to go and getting a proper informative session together where they can calculate budget, closing costs, comfort zone attributes, and tapering to a neighbourhood. And then, more importantly is, ‘Do I like the person that I’m talking to right now? Am I going to enjoy spending 30-40 minutes in 10 homes (with them) today.’

 

Vanessa: Joe and I are very much about the planning process of it. So get a good handle on your finances. You can get pre-qualified for a much higher amount than where your comfort level is. Budget and understand what your monthlies look like. Does that work for your lifestyle? Do you still want to have a restaurant and social budget? Do you want to be able to travel and still have that extra flex money there?

 

The other thing is to help manage expectations. A lot of buyers can easily get discouraged in a seller’s market. So we always try to put our clients in the frame of mind of knowing and understanding the market conditions, how competitive it is, and how to really be resilient in it. I’ve had many times where buyers have come to us and said, I was looking before for like six months, I decided to put it on hold, and I’ve seen how much house prices have increased from when we started looking to now. And we wish we had found the right fit of a realtor beforehand, because it would have saved a lot of money and heartache.

 

What are your thoughts on the post pandemic real estate market?

Because we often hear about pent-up demand. So are we going to see a correction, or will it be full steam ahead with what’s happening now?

 

Joe: Real estate’s a game you stay in. And as long as you’re in it, you’ll be OK. Real estate appreciates. It always goes up. Over-leveraging, going outside of your comfort zone, not falling within the ratios that are allotted by the banks and financial institutions is never a safe bet when it comes to real estate. Be smart with your money and get into investments that you can sustain. The government doing their stress testing is positive because the sale on money at X per cent right now is not something that’s sustainable long-term.

 

As long as you can stay in the real estate game, a correction is something that may or may not happen, but it’s not as relevant over that 10-20-year period that you’re going to be in that home.

 

blog, Home Ownership, Mortgage Education, Mortgage News, Uncategorized

Taking Another Look at the First-Time Home Buyer Incentive

Taking another look at the First-Time Home Buyer Incentive

 

What if someone offered you five to 10 per cent toward your down payment on your first home? It might just be enough to make owning property a reality, even if one day you do have to pay back that hand up at market value. Now, what if that someone was the federal government?

 

The idea of the government having a stake in your home, even if it is as little as five to 10 per cent, might make some squeamish. But Matt Imhoff, a Mortgage Broker with Mortgages.ca, suggests giving some serious thought to what that financial assistance can do for you, especially right now.

 

What is the First-Time Home Buyer Incentive

 

Ottawa unveiled the First-Time Home Buyer Incentive about a year ago with the intention of making home ownership more affordable for those just entering the market. It’s a shared-equity mortgage with the Government of Canada offering first-time buyers five to 10 per cent toward the purchase of a newly constructed home; five per cent toward the purchase of a resale or existing home; or five per cent toward the purchase of a new or resale mobile or manufactured home.

 

The buyer needs at least five per cent of their own money to qualify, but personal and federal contributions can’t add up to a down payment of more than 19.9 per cent. The intention is to help first-time buyers reduce their mortgage payments rather than add to the financial burden that can come with home ownership and, now, the uncertainty of a pandemic.

 

It’s not a forgivable loan, however. Anyone tapping into the program has to pay back the government based on the property’s fair market value at the time of repayment. That’s either when the homeowner decides to sell or after 25 years — whichever comes first.

 

Doing the Math on the First-Time Home Buyer Incentive

 

“For me, the benefits I really see are that it does reduce what your mortgage payment is,” Imhoff says. “So if someone is buying with five per cent down and not using the program and someone is buying with 10 per cent with program, it means a lower payment.”

 

That’s a particularly helpful scenario for growing families, he notes. Parental leave and the reduced income it brings can be less stressful with lower mortgage payments, for example. The savings on mortgage payments could also be used to pay off other debt or go into a vacation (when things open up), education or retirement account. But the biggest selling point might just be the fact you can pay off your mortgage quicker.

 

Let’s look at the numbers:

 

Not using the First-Time Home Buyer Incentive

 

Purchase price: $500,000
Down payment (5%): $25,000
Mortgage loan insurance premium (4%): $19,000
Total mortgage: $494,000

 

Payments (five-year fixed at 2.09%): $2,113/month

 

Balance after five years: $414,608
Payments over five years: $126,802

 

Using the First-Time Home Buyer Incentive (5%) – Existing Property/Resale Home

 

Purchase price: $500,000
Down payment (5%): $25,000
First-time Home Buyer Incentive (5%): $25,000
Mortgage loan insurance premium (3.1%): $13,950
Total mortgage: $463,950

 

Payments (five-year-fixed at 2.09%): $1,985/month

 

Balance after five years: $389,387
Payments over five years: $119,089

 

Note: The government shares in five per cent of the value of your property. This is paid either in 25 years, when you sell the property or if you decide to refinance.

 

Using the First-Time Home Buyer Incentive (10%) – New Construction

 

Purchase price: $500,000
Down payment (5%): $25,000
First-Time Home Buyer Incentive (10%): $50,000
Mortgage loan Insurance premium (2.8%): $11.900
Total mortgage: $436,900

 

Payments (five-year fixed at 2.09%): $1,869/month

 

Balance after five years: $366,685
Payments over five years: $112,145

 

Note: The government shares in 10 per cent of the value of your property. This is paid either in 25 years, when you sell the property or if you decide to refinance.

 

In short, paying $128 or $244 less a month on your mortgage, depending on whether you choose the five or 10 per cent incentive, means having $7,700 or $14,600 more in your pocket over the next five years while still coming out ahead on your mortgage balance.

 

Not convinced yet? Imhoff is happy to go through the pros and cons with clients, and discuss payback scenarios. “If a property goes up in value and the government gets five to 10 per cent of that, you still have 90 to 95 per cent,” he says. “I can look at the numbers to show people. I’m sure anyone who takes advantage of the program isn’t going to be kicking themselves if their property goes up significantly and they have to pay back the government.”

 

Expanded Program Now Live!

 

First-time home buyers purchasing a home in the Toronto, Vancouver, or Victoria Census Metropolitan Areas are now eligible for a qualifying annual income of $150,000 versus $120,000 previously, and an increased total borrowing amount of 4.5 times their qualifying income, up from four times previously.

 

For more information, please visit the following link:

 

https://www.placetocallhome.ca/fthbi/first-time-homebuyer-incentive

 

Written by Matt Imhoff