Tuesday, January 25, 2011

Today in broker news, we were told that a recent poll by TD Canada Trust found that 89 per cent said being able to make additional lump sum payments or weekly or bi-weekly payments was important to them.
In addition, the survey also revealed that 75 per cent of Canadians would like the ability to defer or reduce their monthly mortgage payment in the case of an unexpected event or shortfall. As well, 60 per cent would be more likely to make a lump sum payment to pay off their mortgage faster if that gave them the flexibility to pay less at a later date if something unexpected came up.

This afternoon, TD Canada Trust announced that they would add a flexibility feature to their mortgages to make them more attractive to clients.
Why are they do this? Recently, TD Canada Trust decided to change the charge on title for their mortgages from a regular mortgage charge to a collateral charge. They are now registering a charge for up to 125% of the value of your home to allow for future lines of credit when the house value goes up. Unfortunately, this means it's very difficult to get out of a TD mortgage if you decide you want to refinance, low size or anything else before the end of your term. Every mortgage broker I know has stopped sending mortgages to TD as a result.
If they think that this will help to increase their business they are wrong.
Most lenders offer the opportunity to change from monthly to bi-weekly payments. Most will also allow a "miss a payment" option as well. Frankly I don't see TD offering the consumer anything they do not already have available to them from a variety of lenders.
As to the pre-payment privileges, offering 20% pre-payment is a waste for most consumers. With housing prices in the $400K range, the maximum that I have seen people using is 5% and this is a privilege that people pay for !.
As a matter of a fact, I have one lender who will lower the interest rate if you want a lower pre-payment privilege. Who great is that?
Contact me if you want more information at my website or call me at 403-836-1201.

Thursday, January 20, 2011

Mortgage Rule Changes will trigger a mini boom before March 18th deadline

Toronto readers woke up to an article in their paper saying that the new tougher mortgage rules will result in a mini-boom in home sales. How so? Well, last year when the rules changed, peope rushed out to buy revenue properties before the 20% downpayment rule came in. People rushed into homes again in BC and Ontario before the HST was enacted in their provinces in order to save money. Does this mini-boom benefit anyone? Not really, all that is happening is that we are stealing future sales and there will be a slow down after the new rules come into play.
The new rules will not have much of an effect and will actually make it harder for some people to lower their personal debt, which is the reason given for the rule change. When people refinance their homes they use the money in most cases to either pay for renovations which add to the home's value or they use the money to pay off high interest debts. With interest rates below 5%, it is easier to pay off principal and lower your debts faster than credit card debt at 24%.
The Toronto article can be found here. Time will tell as to whether these changes improve Canadians debt loads or not.
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Monday, January 17, 2011

New mortgage rule changs for 2011

Jim Flaherty , the finance minister, made 3 changes to the mortgage rules today.
1- mortgage amortizations were shortened from 35 years to 30 years
2- home refinancing was lowered from 90% to 85%
3- Home equity lines of credit()HELOCS) will not be insured by the government
How will this affect home owners and potential home owners? With 5 years shaved off their mortgages, monthly payments will rise. Consumers will get less house for their money as the monthly payments will put homes previously within their budget in the unaffordable category. How will this affect home owners and potential home owners? With 5 years shaved off their mortgages, monthly payments will rise. Consumers will get less house for their money as the monthly payments will put homes previously within their budget in the unaffordable category.
Of more importance is the 2nd rule change. If you want to refinance and take money out for your TFSA, RRSP, investments or for renos, you will be restricted to leaving 15% equity behind in your home. What most people will do is move to higher interest rate loans such as unsecured lines of credit, consumer loans and credit cards. I believe that this will encourage inflation and result in higher interest rates.
Finally, insuring HELOCS isn't an issue. Most HELOCS have 80% LTV limits so they were not insured anyways.
Today's new rules will be applied March 18th. If you are looking for a mortgage with a 35 year amortization to keep the payments down or if you want to refinance your home, you have until March 17th to take advantage of our present rules.
Call me at 403-836-1201 if you have any questions.
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Tuesday, January 11, 2011

Surpising survey results

The latest research on the broker industry from Maritz Canada for CAAMP, revealed some interesting facts about brokers and their relationships with consumers and lenders.

The study entitled “Canadian Mortgage Broker Channel: Consumer and Industry Perceptions” noted among other things that only 35 per cent of consumers have a full or good understanding of the services provided by mortgages brokers, 17 per cent are aware of the AMP designation and that while two-thirds of those looking for a mortgage consult with a mortgage broker on first mortgages, that falls to 27 and 21 per cent respectively on early-term renegotiation and scheduled renewals.

What does this mean? People have learned that mortgage brokers are a great source for financing for a home . However, these people are either staying with the same lender at renewal time, typically 5 years later or they are going to their regular bank.
This is a big mistake. If you have used a mortgage broker to purchase your home, you should be going back to him/her at renewal time. Some people are finding that they need a second mortgage or a line of credit. They go to their bank when the logical choice would be to go see the person who go you the financing originally. They will know which lenders will do second mortgages behind your first and they may suggest you break your mortgage and refinance if it will end up saving you money in the end.
Remember the old TV commercial. The doctor is guiding the patient through surgery on the telephone. If you wouldn't do surgery on yourself, why would you want to negotiate the largest financial decision you make in your lifetime without having the background. Leave it to the experts.
Who else can shop the market for you and get you the best rates? As well, mortgages may have changed since your last one and a mortgage broker would be aware of any changes that could benefit you.
The moral of today's story is : When it's time to renew your mortgage call your broker if he hasn't already contacted you. Make a smart choice.

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