Thursday, November 7, 2013

Are Gift Letters blowing up the Real Estate Bubble?

Recently a National Post article brought up an interesting issue. Are parent's fueling the real estate boom in Toronto by giving their children a down payment to purchase a home now rather than let them take time to save it up on their own.
    IN a recent blog, Garth Turner, a former MP, said that this is running counter to the government's attempt to cool the real estate market by getting people into the market before they normally would be entering it.
   He felt that this was throwing the natural forces of the market off. I'm not so sure about that.
 When I got married and started looking at our first home, my parents gave us some money for the down payment. I found out years later that my grandparents did the same thing for my parents when they bought their first home.
   If this has been going on for 3 generations in my family, I think it probably is going on in plenty of other Canadian families.
  Sometimes people look for a problem when there isn't one.
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Thursday, October 31, 2013

Why bank preapprovals are not as good as a mortgage broker's.

It's so satisfying to be able to beat the banks at their own game.
  I was in a meeting recently when it was mentioned that all preapprovals by this lender are underwritten before issued. I've known this for some time but a question came to mind. Do banks underwrite their preapprovals. When you go to a bank and fill out an application does anyone check over the numbers and your credit report and see how much you really can afford?
     I asked this question and was told that banks don't underwrite their preapprovals. This is the reason why you are preapproved for $400,000 and when you make an offer on a house for $400,000 it may be declined by the bank. If they took into account the $500 a month car payment that you have they could have given you a more accurate pre-approval anmount of $350,000.
     I should caution you. Not all lenders do this. If you are concerned you should tell your mortgage broker that you want a pre-approval that has been underwritten. This limits the number of lenders it can be sent to but you can shop with confidence with this document in hand.
  For further information contact David Cooke at 
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Monday, September 9, 2013

Brace for mortgage renewal time.

Fixed rates nudge up yet again – - – although still well below historical norms, fixed rate mortgages continue to rise, slowly but surely. They have gone up 5 times in the past 3 months.  Many borrowers are still enjoying variable rate mortgages at 2.25% or prime less 75 basis points, some even lower. What’s going to happen when these mortgages come up for renewal?
Let’s assume your mortgage was done 5 years ago with a 35 year amortization. Further, let’s assume you went with a variable mortgage rate at 2.25% – - what a great choice you made! The renewal date on your mortgage is October 1st, and there is $300,000 outstanding. Your current mortgage payment for the past 5 years has been $1031.06 monthly. And finally, let’s assume that this time, you decide to go with a fixed rate mortgage at current rates today – - your monthly payment will increase to $1512.10! – - an increase of almost $500 amonth.
    Let's say you  decide to stay with a variable rate mortgage. The best discounted rates today are prime minus .40 or 2.60%- your monthly payments will still rise to $1250. Here's something else you should be aware of. The mortgage rules have changed in the past 5 years. If you alter your mortgage amount in any way, you do not get the 35 or 40 year mortgage amortization you had 5 years ago. It will drop to 25 years which will increase your monthly payments.
 Can your budget absorb this increase? It is especially important for you to contact a mortgage broker before renewing as you may not be aware of these changes and a broker's impartial advice can and will save you money. For more information visit David's website at

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Thursday, July 25, 2013

Canadian Housing Still Affordable

It’s difficult to scan the latest news without coming across one headline or another that talks about Canada’s housing market being on the verge of collapse or its bubble bursting.

But the true market experts beg to differ. That’s why it’s important to look at the facts.

According to BMO Capital Markets, an examination of valuations and affordability across the country – not just in Toronto and Vancouver – suggests less risk of a nationwide hard landing than implied by many headlines.

In fact, aside from detached properties in Vancouver, Toronto and Victoria, the other major cities BMO Capital Markets studies appear affordable for median homebuyers.

In other words, mortgage payments and other housing-related costs do not exceed 39% of family income (that’s the guideline established by the government in July 2012 for obtaining an insured mortgage).

In addition, with the exception of Vancouver’s condos, Canada’s major cities would remain affordable even if mortgage rates rose two percentage points to more normal levels.

Nationwide, mortgage payments on the average-priced house consume a moderate 28% of household income, or 23% for people living outside Vancouver and Toronto, says BMO. Keep in mind that national mortgage-service cost ratio peaked at 44% in 1989 and 36% in 2007.

Most important, the current 28% matches the long-term norm, suggesting that rising income and falling mortgage rates have largely offset the deterioration in affordability caused by higher home prices.

To pump life into the economy, the Bank of Canada (BoC) has kept Canada’s overnight rate at just 1% since September 2010. According to BMO, a normalized overnight rate would be closer to 3.5% given the inflation target of about 2%.

RBC Economics also notes that, while home prices are currently elevated, exceptionally low interest rates keep the ownership cost burden manageable for the most part.

While affordability levels generally do not appear to pose a threat to the Canadian housing market at the moment, RBC cautions things could be radically different if interest rates were to move rapidly and significantly higher, explaining that exceptionally low mortgage rates have been the main factor preventing affordability from reaching dangerous levels in recent years.

Thankfully, RBC sees continued lower interest rates, expecting the BoC to leave its overnight rate unchanged at 1% throughout 2013 and raise it only gradually starting in 2014.

The CD Howe Institute’s monetary policy council is recommending the BoC keep the target at 1% until March 2014.

RBC believes the eventual rise in rates will take place at a time when the Canadian economy is on a stronger footing, thereby generating solid household income gains, which, in turn, provide some offset to any negative effects from rising rates.

If interest rates remain low, income continues to rise and home prices stabilize in 2013 – as BMO anticipates – fears of a deep housing correction should recede.

With mortgage rates remaining at all-time lows, now’s a great time to get a new mortgage and/or take measures to accelerate your mortgage payments while rates are still low. There are many ways to pay your mortgage off quicker such as increasing the frequency of your payments from monthly to weekly or every other week, or making extra or lump sum payments.

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Friday, June 14, 2013

The Public's fear of Small Lenders

Every day I hear clients say, " who are they? I've never heard of this lender. Can't you put me into a bank mortgage?" Yes, I could but I like you and want to do what's best for you.
As a mortgage broker, I offer mortgages from banks, trust companies , credit unions and mortgage companies , sometimes called, "monolines". What is a monoline?. It is a financial company that only deals with one aspect of the financial market, in this case, mortgages. Unlike banks that offer car loans,RRSP's , consumer loans, credit cards and bank accounts, monolines only deal in mortgages.
What does this mean to you? No cross-selling. If you have one product at a bank they will call you, ask you when you visit a branch and mail you literature trying to get you to move all your banking business to them. This can be annoying and you do not always get the best products but you have it all in one place, which is what they want. Why? You are less likely to shop around and to move it to another institution if you have all you banking stuff in one place. You now are paying more for the same mortgage than your neighbour, just for the convenience of having your stuff in one place. Here's another trick. You know the mortgage insurance that banks try to sell you? It is non-transferable. When you move your mortgage you have to re-apply. If you are older and now have per-existing conditions, , it can be expensive and may not be available any more. Interestingly, the insurance companies that offer this product to the banks offered to make it transferable and the banks declined the offer. , hmmm. In who's best interest is that?
Many people worry about monolines being small. Why? They worry that if the monoline were to go bankrupt they could lose the mortgage. No worries, the mortgages are sold in bundles to insurance companies and banks. As Boris Bozic of Merix Financial says, "Why are you worried? you are not depositing your money with us, we are giving you the money?"
As you can see, there are no disadvantages in dealing with a mortgage company rather than a bank and there are plenty of advantages. Who needs a bank marketing department calling them at supper time 2 times a month to try to sell insurance, RRSP's or trying to get you to open another bank account?

      Banks have limited choices and they can not offer you the best rates , nor will they. They are interested in cross selling and will try to year after year. It's in your best interests to consider a monoline lender and to consult a mortgage broker to see who have the best product for you. 
Let me finish by offering you this video on monolines. It's an eye opener for consumers. 
Enjoy the video.
If you have any questions, pop me a line at 

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Tuesday, April 23, 2013

Woman almost loses her home due to bank oversight.

 There's a reason why people go to mortgage brokers to get home financing. That's all a broker does 40 hours a week, process loans. However, many people still feel tied to their banks and credit unions for all their financial transactions. The difference is that when you go to a bank, Tom, the teller, may be opening bank accounts, transacting RRSP orders, helping people with their safe deposit boxes and you are his first mortgage in several weeks.
     In the attached article, it turns out that the lady fell ill and was off work. She couldn't make her mortgage payments and was in danger of losing her house. As an important part of arranging a mortgage, I always offer life and disability insurance to my clients. If something happens to them, I can refer back to the file and tell them that they are covered. It turns out that this woman had coverage but no one at the bank knew.
   Remember this the next time your mortgage comes up for renewal or you are considering buying a home. The article can be found here.
 David Cooke is a Calgary mortgage broker serving the province of Alberta. His website is
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Thursday, April 4, 2013

What's happening to the Calgary Spring Home Buying Market?

The newspapers have been telling us that it is now more difficult to qualify for a mortgage. Housing sales have dropped by 20% in Vancouver. So, what's happening in Calgary?  Many homes are now receiving competing offers from purchasers. Why is this? 
Well if you check with the Calgary Real Estate Board, (CREB) website you will see that the number of active listings for this time of year are down 20% from last year. As a result the most desireable homes are selling quickly. What does that leave for you if you missed the house of your dreams?
   Make another home , the house of your dreams with the Purchase Plus Improvements  program from CMHC and Genworth Financial. These are the people who insure your mortgage against default and they want you to have a nice house. 
     How does this work? If you find a house in an older neighbourhood you may love the location but not care too much for the house. You know the place, it's right across the street from a school and a park, within walking distance of public transportation but it was built 40 years ago and it has lime green wall to wall carpeting combined with a basement with fake wood paneling. 
   If you think that you will have nightmares waking up to this 70's creation, don't worry.
 Take a trip to a home renovation store like Home Depot and get a quote on new Burber carpeting.
Make an offer on the house and then have your mortgage broker submit your offer with the new carpeting quote to a mortgage lender under the Purchase Plus Improvements program.
 If it is approved your real estate lawyer will receive 2 cheques. One for the purchase of the home and a second one to cover the renovations. When they are complete, the lawyer will pay out the renovations. Sound simple? It is . If you want more information on the program you can check it out here. If you want to know if you would qualify for this program contact me at my website.

David Cooke is a Calgary mortgage broker with Dominion Lending Centres Westcor in Calgary Alberta.

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Monday, March 25, 2013

Jim Flaherty thinks Canadians do not deserve low mortgage rates

low mortgage rates from Calgary mortgage broker
Canadians don't deserve low interest rates
Last week, Jim Flaherty, the finance minister of Canada contacted Manulife Bank and told them off for offering a 5 year fixed rate mortgage at 2.89% instead of their regular 3.09% rate.
 Every spring, all the lenders offer their best rates in the hopes of building market share and getting a bigger piece of the mortgage market. Rates fluctuate over the spring as each lender tries to get more mortgages and then they back off and another lender will jump to the front.
   This has happened every year that I have been a Calgary mortgage broker and I suppose it will in the future. The difference this year is government intervention. Last week was not the first time that Flaherty has interfered in bank operations.
  A couple of weeks ago he told BMO (Bank of Montreal) to cease advertising a 2.99% fixed rate.
People in the finance world are so upset they have started calling the minister, Comrade Flaherty.

   In response to the move towards creeping socialism and planned economies the Canadian finance industry is now offering for a limited time only, an unadvertised special of 2.89% for a 5 year fixed rate mortgage. If you feel that you should be able to decide whether you want to pay 2.89% or 3.09% because you are an adult then let me know. You can apply online at my website or email me from there. .
By the way, if you are in year 3 or 4 of a mortgage at 5% or so, it may be worthwhile to renew your mortgage now even with the penalties. Contact me and we can calculate your savings.
David Cooke is a Calgary mortgage broker with Dominion Lending Centres Westcor . He has been giving financial advice and processing mortgages since 1991. 

Friday, March 22, 2013

Getting a Mortgage Pre-Approval

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Getting a Mortgage Pre-Approval

If you are looking for a new home, be sure you are pre-approved. With a mortgage pre-approval, a licensed mortgage professional can do a more complete verification prior to sending you shopping for a home, and with that done, the dollar figure you are going shopping with is actually what you can spend.
The mortgage professional that you work with to get pre-approved will let you know for certain what you can afford based on lender and insurer criteria, and what your payments on a specific mortgage will be. Dominion Lending Centres mortgage professionals can lock-in an interest rate for you for anywhere from 60 - 120 days while you shop for your perfect home. By locking in an interest rate, you are guaranteed to get a mortgage for at least that rate or better. If interest rates drop, your locked-in rate will drop as well. However, if the interest rates go up, your locked-in interest rate will not, ensuring you get the best rate throughout the mortgage pre-approval process.
In order to get pre-approved for a mortgage, a mortgage professional requires a short list of information that will allow them to determine your buying power. A mortgage professional will explain to you the benefits of shorter or longer mortgage terms, the latest programs available, which mortgage products they believe will most likely meet your needs the best, plus they will review all of the other costs involved with purchasing a home.
Getting pre-approved for a mortgage is something every potential home buyer should do before going shopping for a new home. A pre-approval will give you the confidence of knowing that financing is available, and it can put you in a very positive negotiation position against other home buyers who aren't pre-approved.
David Cooke is a Calgary mortgage broker. For more information contact him via his website here.
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Tuesday, March 19, 2013

Over 2/3's find mortgage shopping stressful - survey

Survey finds obtaining a mortgage is complicated and time consuming


Haggling for a rate and deciding on the right term are among the most stressful parts of getting a mortgage, new ING DIRECT poll reveals
TORONTO, March 12, 2013 /CNW/ - As mortgage season heats up, a new survey commissioned by ING DIRECT finds that a majority of Canadians (67%) who have had or currently have a mortgage feel the process is either complicated (31%), confusing (20%) or hard to figure out (16%). Thirty-eight per cent of current or former mortgage holders say getting a mortgage is time consuming while one in five describe the process as annoying. By comparison, a mere 7% of respondents feel the process is stress-free.
"Whether you're a first-time home buyer or shopping around for a new mortgage, applying for a mortgage doesn't have to be a confusing or complicated experience," said Peter Aceto, president and CEO at ING DIRECT. "Choosing a bank that provides a great rate up front and offers flexible terms means saving both time and money over the long run. We're committed to making the process of getting into your home easier and giving clients the option to pay off their mortgage faster."
The survey revealed that negotiating for a rate (59%), deciding on the right term and payment schedule (55%) and getting customer service help from the lender (35%) are among the most stressful aspects of obtaining a mortgage. Respondents age 18 - 34 indicated haggling for a rate (65%) was among the most stressful part of the process while over half (56%) agreed researching and comparing offers made the process more difficult.
"There's an assumption that getting a mortgage from a branchless bank is more difficult. In fact, our mortgage Clients have a dedicated mortgage specialist to help them along the way," said Nicole Wells, Head of Retail Lending at ING DIRECT. "We always offer our Clients a great rate, and options that provide value and make the process simpler. Better yet, our Clients never have to go to a branch at all - they can apply for a mortgage from the comfort of their own couch."
Additional survey stats:
  • Respondents indicated that simplified language in mortgage contracts (41%) and the ability to obtain a mortgage from the comfort of their homes (16%) would make the process of obtaining a mortgage easier
  • 20% of those age 35-54 feel the ability to obtain a mortgage from home would make the process easier
  • 16% of respondents feel getting a mortgage would be easier if they had access to more education about mortgages
  • Current and former mortgage holders feel lenders (34%), brokers (20%) and family/friends (13%) provided the most help when obtaining a mortgage. If you want to discuss these findings and avoid stress in your life, contact me via my website or by email.
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Thursday, March 14, 2013

Calgry listed as an "out-performer" in Canadian real estate market


Pace predicted to be moderately lower for the rest of Canada


Calgary realtor Kaitlyn Gottlieb of Century 21 Bamber Realty Ltd.

Photograph by: Colleen De Neve Colleen De Neve, Calgary Herald

CALGARY — Canada is expected to embark on a gradual, modest, downward housing market adjustment over the next three years with a “measly” two per cent annual price gain over the next decade, says a study released Monday by TD Economics.
But the bank has also listed Calgary as an “out-performer” in Canada for the long-run rate of return on Canadian real estate. Compared with the national picture, Edmonton, Vancouver, Victoria and Toronto were also listed as out-performers for the future.
“With the slowdown in the Canadian housing market well entrenched, many are worried about the future value of their homes. This is not surprising as real estate is the largest financial asset most Canadians have in their possession,” said TD Economics.
“The housing market is prone to cyclical ups and downs and we should embark on a gradual, modest, downward adjustment over the next three years. We project a 3.5 per cent annual rate of return on real estate to prevail beyond 2015 – this is the long-run rate of increase for home prices in Canada. However, this pace will be moderately lower than they have been historically (5.4 per cent).”
Derek Burleton, vice-president and deputy chief economist with TD Economics, said Calgary had a run-up in prices before the recession and then a sharp decline during the recession.
“I guess prices didn’t come back too much but certainly sales fell back and now you’re getting a bit of a cyclical bounce,” he said, adding a long-term forecast takes into account key economic drivers like population growth and the potential of the economy to generate income.
“Based on some of the key drivers of growth, Calgary ranks right up there at the top and that should stand the housing market good stead. At least continue to drive above average price gains over the long run.”
The average MLS sale price in Calgary was $180,420 in 2000. That climbed to a peak of $423,770 in 2007 before dipping to $394,064 in 2009. From then, it has steadily climbed, reaching an all-time record of $428,644 in 2012.
Becky Walters, president of the Calgary Real Estate Board, said the Calgary market is really strong this year due to the in-migration it has been getting over the past 12 months.
“It’s not maybe as strong this year as it was last year but it’s certainly strong,” said Walters. “We’re seeing a nice steady growth. We’re seeing prices starting to come up a little bit not tons.”
For example, according to CREB, year-to-date until March 10, there have been 3,595 MLS sales in the city, up 4.66 per cent from the same period a year ago, and the average sale price has jumped by 9.23 per cent to $451,189.
However, at the national level, TD said a string of lacklustre performances over the next few years will mean that the annual rate of return for real estate in nominal terms will be a “measly” two per cent over the next decade, meaning home price gains should simply match the pace of inflation.
“Our research at REIN Canada is showing that for the coming five years, outperforming markets will be those based not in speculation or foreign investment, they will be those markets supported by underlying economics,” said Don Campbell, senior analyst and founding partner of the Real Estate Investment Network. “The Canadian real estate market is too broad and too diverse to paint with one story or byline and will become an increasingly regional story. Supporting economics such as increasing jobs, increasing population through migration — especially those areas which are attracting a younger, working age cohort — and increasing incomes will play a larger role in market demand and value than it has in the last five years.
“Despite Calgary and Edmonton’s value moves already experienced, they are both rated in the most affordable major centres in the country because average incomes are also higher than in most other regions. This, along with the younger age of in-migrants to these cities from other parts of the country, will be strong and supporting factors for these market for the coming years.”
Richard Cho, senior market analyst in Calgary for Canada Mortgage and Housing Corp., said in the Calgary region the average price in 2013 is expected to reach $423,000, up 2.6 per cent from 2012.
“The rate of growth is anticipated to be higher here than in many other areas of the country as the average resale price in Canada is forecast to increase by only one per cent in 2013,” he said. “Supply of homes in Calgary’s resale market has come down from a year earlier while sales have been fairly stable. The resale price in 2014 is forecast to continuing rising in Calgary, averaging $434,000.”

If you want more information on variable vs. fixed rates visit my website or email me. 
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Thursday, March 7, 2013

Tax Breaks for new home buyers

Well, it 's that time of year when we are doing our taxes. As you look for all your receipts and fill out your tax forms here's one tax credit you may qualify for.
 Did you buy a house in 2012? If so you may be eligible for a $750 tax credit. Check the CRA website to see if you qualify.
  Do you live in Calgary, Airdrie or Okotoks? Replacing your present toilet with a water reduction unit could get you up to $150 back from your municipality. This could pay for the toilet and then the water savings would all go directly into your pocket.
   Are you trying to save for a house? You will need a 5% down payment.  Did you know that you could use your RRSP's as part of your down payment.? Here's the strategy. Buy RRSPs and get a tax credit. Hold them for at least 91 days and then you can cash them out to use for the down payment.
  Note that you have to fill out forms at your bank or credit union to show that you will be paying these RRSP's back over the next 15 years to avoid having to pay income tax on the money you receive.
   This strategy can get you into a home now, while interest rates are low and home prices are still reasonable. While you are paying your mortgage down and building equity, you are also going to see your house value go up adding to existing equity.
  "but if I use this strategy I will have a mortgage and a RRSP payment at the same time, I'll be poor"
 No , not necessarily. Your mortgage payment should be pretty low and may be less than you have been paying for rent. As your RRSP only needs to be paid back over 15 years it's managable.
 If you cashed in $15,000 in RRSP's you would pay back $1000 per year or $83. a month. That's pretty manageable , isn't it?  If you need more information, you can visit my website at
There's plenty of information and informative videos. Feel free to contact me for more information as well.

Tuesday, January 15, 2013

How to avoid having your mortgage approval “unapproved”

 It happens every year.  A client will go to a mortgage broker or the bank and get a pre-approval and then go house hunting.  They find a home and make an offer which is accepted. They then go back to the lender with the offer and all the paperwork and all of a sudden, they are not approved.
 How did that happen? What happened to the preapproval?   What most people do not realize is that a preapproval is a brief overview to see if you are creditworthy and it tells you how much you can afford. The pre-approval is really no more than an interest rate hold.
   Inexperienced bank employees and a few brokers fail to give their clients the 5 Commandments when they give their clients the pre-approval.
 Here they are:
1-   Don’t make any large purchases – don’t buy a new car or change the lease. Do not go out to buy the new furniture for your home until after the mortgage is approved. Even if you have one of those no payments for 90 days plans from the Brick, Sears or Leon's , they do appear as purchases made at this time on your credit bureau report.
2-      Don’t apply for new credit – I know the zero down balance transfer looks appealing but you don’t need another hit on your credit bureau. Put off the temptation until after the deal is done.
3-      Keep your job – This may sound like a no-brainer but there are a lot of people who will switch forgetting about the 3 month probation or will become consultants which means they are self-employed. Don’t change industries.  More than one mortgage has been shot down by a job change.
4-      Pay your bills – pay them on time and don’t let the balances get close to the credit limit.
                           If you let your balance get close to your limit you can lose 30 points. Go over by a                   dollar and you will lose 35 points in a flash. Lenders often check for credit score drops in the days leading up to your visit to the lawyer’s office.
5-      Don’t move large amounts of cash around in your accounts. If you are receiving a gift for your down payment from your parents be sure to photocopy the cheque and the deposit receipt. Money laundering is a big worry with lenders so you should wait until your broker tells you it’s okay to move funds.
Finally,  be aware that the lawyer will ask you for 2 pieces of identification. If you make an offer on a house use your formal name, not your nickname. If the name on the offer and the name on your identification do not match you could delay or kill the home purchase at the last minute.

Let’s face it. Buying a home is a life changing event. Deal with a professional mortgage broker and you can avoid making stupid mistakes that will deprive you of owning the house of your dreams. 

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