3-Month Penalties Aren’t Always Clearcut

Breaking a closed mortgage usually results in a penalty. With a fixed mortgage, that penalty is typically the greater of 3-month’s interest or the interest rate differential (IRD).
The dreaded IRD has been debated here ad infinitum, but there’s one thing we haven’t covered yet. There is a subtle twist to some lenders’ 3-month interest penalties that many folks aren’t aware of.

When most people calculate a 3-month interest charge they do so by taking their mortgage balance, multiplying by their interest rate, and dividing by four.
That usually works…unless your lender calculates the penalty with a different rate than your contract rate.
Believe it or not, a few lenders (see below) jack up the rate they use to figure their 3-month penalties. These lenders will typically base your penalty on the posted rate at the time you closed the mortgage, instead of your actual rate.
Let’s examine the difference this makes to the typical mortgage holder.
The average mortgage balance in Canada is $170,000, according to CAAMP. The average mortgage rate is 3.64%, or 1.77% off posted rates.
Therefore, the penalty for a “typical” mortgagor being assessed a 3-month interest charge would be about $1,547.
By contrast, the 3-month penalty based on posted rates would be almost $2,300.
In other words, lenders who use arbitrary posted rates to calculate their 3-month interest penalties drain the typical borrower of an additional $752 based on a 20-year amortization. That is:

• About 49% more than other lenders
• Roughly equivalent to paying a 10 basis points higher rate over five years.

And with more than 50% of long-term mortgage holders breaking and/or renegotiating their mortgage before maturity, penalty calculations aren’t something to blow off.
In case you were wondering, there is no legislation prohibiting this practice.
“There is nothing in the Bank Act (or Interest Act) that stipulates exactly what interest rate should be used in the calculation of a mortgage prepayment penalty,” says Natasha Nystrom, Communications Officer at the Financial Consumer Agency of Canada. “The calculation itself is a business decision.”
Theoretically, a lender can use almost any rate short of usury to calculate your penalty, as long as it tells you in advance.
“The Bank Act does require that all Federally Regulated Financial Institutions (FRFI) initially disclose the manner in which their penalty is calculated as well as a description of the components included in the calculation of the penalty,” Nystrom adds.
Here’s what we’d take away from all this...
When you’re comparing two mortgages and the rates are equal, all other terms are rarely equal. The method your lender uses for penalty calculations is one of many reasons why the rate you get doesn’t determine the interest you pay.

---

Mortgage rules roil stock market

The aftershocks of the country’s new mortgage rules may extend well beyond the housing market and to Bay Street, according to market analysts reviewing the performance of the S&P/TSX.
"The S&P/TSX may decline as much as 10 percent over the next year should government measures such as tighter mortgage restrictions spur declines in housing prices," Sadiq Adatia, chief investment officer at Sun Life Global Investments in Toronto, told reporters Monday.

The warning comes on the heels of news that the exchange's SPTSX compositie index dropped 0.5 per cent this year through Aug. 10. That's quite removed from the 8.1 per cent gain for the MSCI World Index. The gap between the two is, in fact, the biggest since1998.

The performance in Canadian shares this year has trailed behind most other markets in developed countries.

Forecasts for a stagnant Canadian economy in 2013 and the new, tighter mortgage rules are now raising concerns that that poor performance will only worsen.

Ironically, real estate may ultimately benefit from any slump in the capital markets as Canadians turn to property to make up for an shortfall in their stock market portfolios.

Don’t fear the small mortgage lender Decoding the mortgage market

Don’t fear the small mortgage lender Decoding the mortgage market

Mortgage lenders come in all sizes, ranging from RBC – the biggest in the country – to tiny wholesale lenders and credit unions.
When it comes to entrusting a company with your biggest debt, odds are, name recognition matters to you. Consciously or subconsciously, people gravitate to well-known lenders partly because there’s a feeling of safety in “big.”

Even when a smaller lender has tantalizing rates and the best terms, homeowners sometimes tend to avoid it if they don’t know the name. An oft-cited reason for that is fear that the lender will go out of business. And that is certainly not unprecedented.
If we’re talking about “prime” lenders – i.e., those catering to more creditworthy customers – the list of extinct lenders includes companies like Abode Mortgage, Citizens Bank, Dundee Bank, Maple Trust and ResMor Trust. Mind you, most of these lenders were purchased by others.
Just recently, we buried another lender. FirstLine, once one of the biggest mortgage companies in the country, closed its doors Tuesday after 25 years in business.
People worry about lenders closing down for one main reason: they’re scared the lender will force them to repay their mortgage early. In reality, however, that rarely happens with prime lenders.
The bigger risk has been with subprime lenders. In fact, some subprime borrowers have even lost their homes in cases where they couldn’t refinance elsewhere after their lender shut down.
But if you’re a qualified borrower with provable income, do you really need to be worried if your lender goes out of business?
“Not at all,” says Boris Bozic, president and chief executive officer at Merix Financial.
“I always find it fascinating that people are concerned about smaller lenders,” he adds. “We’re not deposit takers. We’re giving money, not taking money. The risk is all ours.”
Many second- and third-tier lenders get their funding from large financial institutions and that funding is fairly stable, Mr. Bozic says.
“Even if a company were to run into financial difficulties, the vast majority of the time there are backup servicers in place.” This sort of contingency planning is almost always required by the parties funding a lender’s mortgages.
If a lender were to close, Mr. Bozic says another financial institution would simply take over the mortgage.
When a lender sells your mortgage to another party, you just keep making the same payments like nothing happened – albeit to a different company, in some cases. The new lender is generally required to honour the terms of your old mortgage contract, Mr. Bozic says.
The one thing that will change is the renewal offer you receive at maturity. Generally, the new owner of your mortgage will be the one making your renewal offer. That could be good or bad depending on how competitive the new lender is. But smart consumers always shop their lender’s renewal offer anyway, so this isn’t a major issue.
Overall, the probability of a lender disappearing is low. On its own, it’s not enough reason to avoid a less prominent company.
That’s especially true when the lender has the best deal in the market – which is the case with many smaller lenders today. If you can find a 0.10 percentage point lower rate, you’ll save roughly $1,200 over 60 months on a standard $250,000 mortgage.
If you’re interested in getting the best rate possible, you need to be open to saving money with a smaller mortgage company. Just be sure to get independent advice so you can sidestep the ones with onerous contract restrictions. Examples of those include fully closed terms, costly penalty calculations, porting restrictions, refinance limitations, and so on. Some lenders have rather unpleasant fine print, but that’s true for micro and mega lenders alike.
There are certainly reasons to choose a major bank or large credit union for your mortgage, including branch accessibility, integrating your mortgage with your banking or credit line, and access to other financial products. But it’s rarely necessary to shun lesser-known lenders for fear they’ll close and leave you stranded.

ROBERT MCLISTER

Special to The Globe and Mail

Published Friday, Aug. 03 2012, 7:00 PM EDT

For more info on this story or to ask a question regarding a mortgage please contact

Michael Distefano Mortgage Agent
Dominion Lending Centres BTB Mortgage Solutions
Phone: 905-357-5366
Cell: 905-246-5363
Fax: 905-357-6654
Toll free: 877-357-5366
E-mail miked@beatthebankmortgage.ca
Website http://www.beatthebankmortgage.ca

About DLC Leasing Inc BTB Mortgage Solutions

* DLC Leasing is the leasing division within Dominion Lending Centres Inc.

* Our leasing programs provide up to 100% financing on business-related equipment.

* Leasing options include new equipment leasing; used equipment and vehicle leasing; customized solutions through vendor finance programs; and lease-backs –where the lender buys equipment from a business owner and the owner leases it back.

* Technology, heavy equipment and trailers, furniture and hospitality equipment, and manufacturing and industrial equipment are just a few examples of available leasing options.

* With access to multiple lending sources, Dominion Lending Centres’ Lease Professionals can cater to leasing deals for a variety of credit scenarios ranging from A to C credit quality.

* Because many of our Lease Professionals are also licensed mortgage agents, we can offer standard equipment leases and creatively structured solutions for seasonal, new or growing companies.

* Working with someone who is both a lease and mortgage expert enables you to even use commercial and residential mortgage and property credit line products, alone or in combination with lease financing, to help achieve the best solutions for your equipment acquisition needs.

* Our Lease Professionals can even break up large-dollar transactions into multiple leases across a number of funders to ease and simplify the approval process.

For more info on this story or to ask a question regarding a mortgage please contact

Michael Distefano Mortgage Agent
Dominion Lending Centres BTB Mortgage Solutions
Phone: 905-357-5366
Cell: 905-246-5363
Fax: 905-357-6654
Toll free: 877-357-5366
E-mail miked@beatthebankmortgage.ca
Website http://www.beatthebankmortgage.ca

About Dominion Lending Centres BTB Mortgage Solutions

We are Canada’s largest and fastest-growing mortgage brokerage! We have more than 2,000 Mortgage Professionals from more than 350 locations across the country! Our Mortgage Professionals are Experts in their field and many are ranked among the best nationally. We work for you, not the lenders, so your best interests will always be our number one priority. We have more than 100 mortgage programs, making it easy to choose the best fit for your unique situation. We close loans in all 10 provinces and 3 territories. We can process your mortgage in as few as 7 days. We are the preferred mortgage lender for several of Canada’s top companies. Dominion Lending Centres’ Mortgage Professionals are available anytime, anywhere, evenings and weekends – and we’ll even come to you! For more info on this story or to ask a question regarding a mortgage please contact Michael Distefano Mortgage Agent Dominion Lending Centres BTB Mortgage Solutions Phone: 905-357-5366 Cell: 905-246-5363 Fax: 905-357-6654 Toll free: 877-357-5366 E-mail miked@beatthebankmortgage.ca Website http://www.beatthebankmortgage.ca

2895 St Paul Ave Niagara Falls Ontario L2J 2L3 905-357-5366  http://www.beatthebankmortgage.ca

Maximizing Mortgage Pre-Payments

Canadians seeking a sure-fire investment return should look no further than their mortgage. Paying it down as quickly as you can will, in most cases, result in a stellar return on your investment. Prepayment options are worth exploring because paying down even a small amount of principal (the true cost of the mortgage loan minus the interest) has huge benefits over the life of a mortgage. Mortgages are front-loaded when it comes to interest meaning, in the early years, most of the money you pay goes toward paying the interest on the amount you borrow as opposed to the principal. For instance, if you borrow 95% of your home’s value, you’re paying $3 of interest for every $1 of principal you pay. So, by paying an extra $1 of principal, that’s $3 less you’ll have to pay in interest, at least in the early stages of a mortgage. Range of prepayment options There are a variety of ways to make prepayments work to pay down your mortgage faster. We can discuss your specific needs, but following are some general rules. Most lenders allow you to make a lump-sum payment of anywhere between 10% and 25% of the value of your mortgage per year. The lump-sum payment is based on either the original amount you borrowed or the amount currently outstanding. Since mortgages decrease with each payment, it’s best to negotiate a lump-sum payment option based on the original amount you borrow. That way, if you come into an inheritance, a big bonus or save a large sum of money, you can pay down the largest amount possible. For more info on this story or to ask a question regarding a mortgage please contact Michael Distefano Mortgage Agent Dominion Lending Centres BTB Mortgage Solutions Phone: 905-357-5366 Cell: 905-246-5363 Fax: 905-357-6654 Toll free: 877-357-5366 E-mail miked@beatthebankmortgage.ca Website http://www.beatthebankmortgage.ca

Another factor to consider is when you can make a lump-sum payment. Some mortgages allow prepayments during the year, while others permit it only on the anniversary date. Still others allow you to make prepayments on the day you make your regular payment. If you can’t pay the maximum prepayment amount, it’s still worth your while to at least make some extra payment, even if it’s a few thousand dollars each year. That will still save you thousands of dollars in interest payments. Another prepayment option involves taking advantage of flexible payments. Most lenders allow you to increase your regular payment up to a set maximum, such as 15%, while others allow you to double up your payments. If, for instance, you have a $1,000 per month mortgage payment and increase it by 15% to $1,150, you could shave off as much as five-and-a-half years on a $200,000 mortgage. You can also pay off your mortgage faster by moving to a different payment schedule. Instead of making monthly payments, make them biweekly or even weekly. Using an accelerated mortgage – where you make payments every two weeks as opposed to twice a month – you actually make one extra payment in the calendar year. By paying more and paying faster, you reduce your principal earlier, which lowers the amount of interest you pay. Another option is to round up your mortgage payment from, say, $766 to an even figure such as $800, because any extra little bit goes toward the principal. As always, if you have any questions about paying off your mortgage faster or about your mortgage in general, I’m here to help!

The Importance of credit

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 www.equifax.ca and TransUnion Canada at 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 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. For more info on this story or to ask a question regarding a mortgage please contact Michael Distefano Mortgage Agent Dominion Lending Centres BTB Mortgage Solutions Phone: 905-357-5366 Cell: 905-246-5363 Fax: 905-357-6654 Toll free: 877-357-5366 E-mail miked@beatthebankmortgage.ca Website http://www.beatthebankmortgage.ca

Flaherty: New mortgage rules doing their job

Finance Minister Jim Flaherty announced Wednesday that there will be no more tightening of mortgage rules, following a series of revisions beginning in January.

Speaking from the heart of California’s Silicon Valley, Flaherty said he was happy with the results of recent changes such as lowering the cap on amortization terms.
"There has been some softening in the past month or so,” he said. “So right now there is no intention to intervene again.”
Canada’s over-heating housing market has long been a concern for Ottawa, with home prices hitting a record high for the third straight month in June.
The condo market has been a particular source of contention, with many developers and economists worrying about the sustainability of growing markets in major cities.
"We always monitor the housing market,” said Flaherty. “There has been concern, particularly with the condo market in Toronto and Vancouver. We have taken steps, including recently in June, another step to tighten the market for residential mortgages.”
Since the changes to insured mortgage rules took effect last month, the finance minister has expressed confidence in the pace of change, but only hinted at their effectiveness. Wednesday’s comments mark a change.
Still, conditions for lenders and borrowers remain tighter, which could spell good news for landlords with existing properties.
Confident that the real estate market will continue to cool, Flaherty aims to shift his focus to economic stimulus in a bid to balance Canada’s budgets for the long term.
"We are seeing modest growth, not as much as Americans and Canadians would like it to be, but it is growth. And that's better than many Western countries."

For more info on this story or to ask a question regarding a mortgage please contact

Michael Distefano Mortgage Agent
Dominion Lending Centres BTB Mortgage Solutions
Phone: 905-357-5366
Cell: 905-246-5363
Fax: 905-357-6654
Toll free: 877-357-5366
E-mail miked@beatthebankmortgage.ca
Website http://www.beatthebankmortgage.ca

Home financing rules changing

NIAGARA FALLS - New rules for home buyers shouldn’t affect the real estate market in Niagara, says the president of the Niagara Realtors Association.
On July 9, four rule changes will affect how people borrow money for mortgages and refinancing, how much they’re able to borrow, and how long they’ll have to pay it back.
While the changes affect the housing markets across the country, the trade-off is that interest rates will stay at record-low levels.
“Our take on it is with the affordability here in Niagara. It’s not a big deal,” said Brad Johnstone, who works for Royal LePage Niagara Real Estate Centre and is the president of the Niagara Realtors Association. “With our average sale price at $215,000, the affordability is already here.”
Federal Finance Minister Jim Flaherty announced the rule changes June 19 to keep Canadians from buying houses they can’t afford and getting too far into debt.
The four changes are: the maximum amortization period was dropped to 25 years from 30; the maximum refinancing amount was reduced to 80% from 85%; the gross debt service ratio was brought to 39% and total debt service ratio to 44%; and the availability of government-backed mortgage insurance is restricted to homes with a value of $1 million or less.
Mike Distefano, a mortgage broker who owns three Dominion Lending Centres BTB Mortgage Solutions locations in the region, said it has been a busy couple of weeks as clients scramble to get their financing arranged before the changes kick in Monday.
“We had no idea this was coming, we found out the same day as everyone else did. There were no rumours or buzz,” he said.
Distefano thinks the changes will affect people looking to remortgage their homes more than home buyers looking to get their first mortgage.
“It’s more on the refinancing side. After July 9, a lot of these deals won’t qualify,” he said. “I believe long term it’s a great thing because people have been using their homes as piggy banks — they pay some down and then take some equity out.
“I see a lot of seniors that you’d think would have their homes paid for, but they’re coming in looking for refinancing.”
But he said the timing with the current economy isn’t great, and believes the rule changes are more intended to protect the government-backed CMHC.
Distefano said companies like his will still be able to help higher-risk people get mortgages because of the availability of private financiers. “These private investors will be greedier with their rates, but you’ll find some people will be desperate.”
CHAMBERS JOIN FORCES
The Greater Fort Erie Chamber of Commerce and the Greater Niagara Chamber of Commerce have agreed to work more closely together.
The two organizations signed an agreement this week in which the Fort Erie chamber recognizes the Greater Niagara chamber as the regional voice of business.
Members of the Fort Erie chamber will be invited to participate on Greater Niagara chamber committees, and both chambers will provide on-line connections between the organizations.
HAMBLET’S WINS AWARD
Niagara Falls roofing and siding company Hamblet’s was recently given a Keys to Success award by the CertainTeed Corporation’s Roofers Advisory Council. “Hamblet’s Roofing and Siding is on the cutting edge of the roofing industry,” said Jay Butch, director of contractor programs for CertainTeed Roofing. “We applaud them for their contributions to our advisory council and their continued partnership with us. ”

For more info on this story or to ask a question regarding a mortgage please contact

Michael Distefano Mortgage Agent
Dominion Lending Centres BTB Mortgage Solutions
Phone: 905-357-5366
Cell: 905-246-5363
Fax: 905-357-6654
Toll free: 877-357-5366
E-mail miked@beatthebankmortgage.ca
Website http://www.beatthebankmortgage.ca

CMHC Mortgage Consumer Survey Results

CMHC’s Mortgage Consumer Survey provides valuable information to mortgage professionals to help you better serve your clients. For more than 10 years, this annual survey – the largest of its kind i...

n Canada – has provided insight on consumer behaviours, attitudes and expectations when acquiring, renewing or refinancing a mortgage. Some key findings are presented below. For additional results of the 2012 Mortgage Consumer Survey, click here.

http://www.cmhc.ca/en/hoficlincl/moloin/cosu/index.cfm



Broker share
•In terms of overall Canadian mortgage market share, 27% of mortgage consumers used a mortgage broker to arrange their mortgage in 2012 (23% in 2010 and 2011.)
•By consumer segment, 48% of first-time buyers used a mortgage broker, compared to 32% of repeat buyers.
•Broker share among mortgage renewers reached 21% in 2012, up from 15% in 2011.

Why choose a broker?
•For almost 60% of broker clients, the decision to use a broker was greatly influenced by wanting to get the best mortgage rate or deal.
•More than half (55%) were greatly influenced by past excellent service, while for 52% convenience and wanting to save time greatly influenced their decision.

Satisfaction levels
•Overall satisfaction levels were very similar among mortgage consumers who used a lender and those who used a broker (83% and 77% respectively).
•More than half of broker users (51%) were totally satisfied with their mortgage experience, and another 26% were somewhat satisfied.

Post-transaction follow-up
•Slightly more than half (55%) of broker clients reported that their broker contacted them following the mortgage transaction. In the majority of cases, the purpose was to say thank you (66%), while a third indicated it was to confirm the closing (33%). Only about one in 10 reported that the post transaction contact was to offer advice on how to manage financial difficulty (12%), or to offer mortgage life insurance (11%).
•Of those mortgage consumers who had been contacted by their broker after their transaction, 61% totally agreed that they would likely use the same broker again to arrange their next mortgage transaction.

Degree of influence
•Of recent buyers who used a broker, 45% indicated that the broker was the single most influential person in their mortgage decision.
•A quarter of all buyers, and 29% of first-time buyers, received a recommendation to use a specific broker for their current mortgage. The most common referral sources were real estate agents (35%) followed by friends of the borrower (22%).

Consumer Internet usage
•Overall, 71% of mortgage consumers reported using online sources, up slightly from 65% in 2011.
•About one in three (31%, up from 22% last year) relied solely on the Internet to gather mortgage-related information.
•The incidence of social media use among first-time buyers nearly doubled from 11% in 2011 to 20% in 2012.

For more info on this story or to ask a question regarding a mortgage please contact

Michael Distefano Mortgage Agent
Dominion Lending Centres BTB Mortgage Solutions
Phone: 905-357-5366
Cell: 905-246-5363
Fax: 905-357-6654
Toll free: 877-357-5366
E-mail miked@beatthebankmortgage.ca
Website http://www.beatthebankmortgage.ca

Economists to condo investors: Smile!

Condo investors in Toronto have every reason to be keep smiling, with two separate bank reports suggesting their assets are almost certain to retain their value at the same time their cash flow gets buoyed by rental demand.

“As CMHC… mentioned, capital return for investors who bought new condominiums and decided to rent them once the construction was comple...

te, could earn superior returns than on other investment products,” reads Laurentian Banks’ July economic outlook. “Furthermore, condominiums rents are generally 40% more expensive than apartments of same dimensions in the Toronto CMA, the most important spread in the whole country.”

Smiling yet?

There’s more.

RBC is also weighing in on the future of Canada’s most controversial housing market, suggesting there’s no indication condos, despite what most see as a glut of inventory, are in a bubble.

Far from it.
“Based on market activity to date,” say economists for the heftiest of Canada’s big banks, “the total number of new housing units (condos) completed by builders has not exceeded the GTA’s demographic requirements and is unlikely to do so by any significant magnitude in the next few years.”

Phew!

That dual analysis effectively counters concerns that T.O.’s high-rise properties are primed to fall in value as renters find themselves spoiled for choice and investors are forced to slash prices. The naysayers are also worried that even new construction will be subjected to a major price correction and in the short-term, a phenomenon directly tied to mortgage rule changes making it harder to win financing.

That could, in fact, still happen, although not likely on the scale many analysts had predicted earlier this year, says Laurentian in its analysis.

CMHC’s 2012 Home Purchase and Renovation Report

CMHC published their 2012 Home Purchase and Renovation report last week. Below is a brief outline of their findings. To view the full report simply visit www.everythingyouneed.ca and click...

on the “Market Insight” section or see attached PDF.

· 37 per cent of homeowner households (approx. 1.7 million households in 10 major centres) undertook renovations in 2011. This represents about 200,000 fewer households, a slight decrease from 42 per cent in 2010.

· Only $21 billion was spent on renovations in 2011 across the 10 major centres surveyed, compared to $22.8 billion in 2010. The estimated average cost of renovations undertaken in 2011 was $13,709, an increase from $12,972 in 2010.

· Renovation intentions for 2012 are similar to the 2011 results. About 38 per cent of respondents indicated that they intend to spend $1,000 or more on home renovations by the end of 2012.

· Renovation intentions for 2012 are strongest in St. John’s, where 48 per cent of consumers indicated they plan to undertake renovations costing $1,000 or more. This is followed by Winnipeg (44 per cent) and Halifax, Ottawa and Edmonton (42 per cent each). The proportion of potential renovators is lowest in Vancouver (34 per cent), Montréal (37 per cent) and Toronto and Calgary (both at 38 per cent).

· Overall, the share of households that intend to buy a primary residence in 2012 is five per cent. Home buying intentions are strongest in Edmonton (7 per cent), Québec and Calgary (both at 6 per cent) and St. John’s and Montréal (5 per cent each). Purchase intentions in all other surveyed centres are at
four per cent.

Bank Of Canada takes a more hawkish tone

Data Release: Bank of Canada takes a more hawkish tone

• As widely anticipated, the Bank of Canada announced that it will hold the overnight rate at 1.0%, but signaled that an interest rate hike may come earlier than markets are anticipating. The Bank of Canada judges that given improved global and Canadian economic conditions, there is less slack in the Canadian economy than was anticipated and “some modest withdrawal of the present considerable monetary policy stimulus may become appropriate”.
• The Bank of Canada revised up its outlook for the Canadian economy. The Bank expects the economy to grow by 2.4% in 2012, up from the forecast of 2.0% in January’s MPR. While the Bank revised its growth outlook for 2013 down to 2.4% (from a previous 2.8%), stronger economic growth this year is likely going to help the economy absorb excess slack earlier than anticipated, with the output gap now expected to close in early 2013 – compared to late 2013 in January’s MPR. As a result, inflation is expected to remain firmer than was expected, but still hover around the Bank of Canada’s 2.0% target.
• While the revision in part reflects continued robust activity in emerging markets and a more entrenched U.S. recovery, the Bank of Canada expects that business investment and household spending will do most of the heavy lifting over the next few years.
• The Bank highlighted three key risks to the outlook. First, while Europe is expected to emerge from recession in the second half of 2012, the Bank highlighted that major risks surround that outlook. Second, there are risks surrounding the threat from high commodity prices. And, last but certainly not least is the risk of rising Canadian household debt.

Key Implications

• This morning’s Bank of Canada announcement suggests that Canadian interest rates are going to rise sooner than was anticipated, but the extraction of monetary stimulus is likely to remain gradual. The language of the communiqué makes a rate hike by the end of 2012 highly likely, but the timing in still uncertain. The last time the Bank of Canada signaled an upcoming rate hike, it took a few meetings for it to follow through.
• The change in language does not come as a shocking surprise. While Canadian economic growth was choppy over 2011, real GDP likely grew at an average close to 3.0% over the second half of 2011 and first quarter of 2012 – a pace of economic growth that is well above trend. In addition, keeping rates this low with a well functioning banking system will only help contribute to the household debt problem building in Canada – a risk that the Bank of Canada Governor has warned against in many speeches and one that he has recently communicated a willingness to lean against.
• Still, there are reasons to remain cautious. Risks in Europe remain high. With worries around Greek debt out of the way for now, focus has shifted to Spain. In addition, the Bank of Canada remains more optimistic on economic growth, particularly domestic spending, than TD Economics. We anticipate the Canadian economy will grow by 2.2% in 2012 – a speed of economic growth that is consistent with the output gap closing in mid-2013 – slightly later than the Bank of Canada’s view.
• Overall, a more compelling argument has been building for the extraction of monetary stimulus, but the pace of rate hikes will likely be gradual. We anticipate that despite the change in language in this morning’s announcement, rates will remain lower than normal for some time.

10 Questions Mortgage Borrowers Should Ask But Often Don’t

1. If I have mortgage default insurance do I also need mortgage life insurance?

·         Yes. Mortgage life insurance is a life insurance policy on a homeowner, which will allow your family or dependents to pay off the mortgage on the home should something tragic happen to you. Mortgage default insurance is something lenders require you to purchase to cover their own assets if you have less than a 20% down payment. Mortgage life insurance is meant to protect the family of a homeowner and not the mortgage lender itself.

 2. What steps can I take to maximize my mortgage payments and own my home sooner?

·         There are many ways to pay down your mortgage sooner that could save you thousands of dollars in interest payments throughout the term of your mortgage. Most mortgage products, for instance, include prepayment privileges that enable you to pay up to 20% of the principal (the true value of your mortgage minus the interest payments) per calendar year. This will also help reduce your amortization period (the length of your mortgage). Another way to reduce the time it takes to pay off your mortgage involves changing the way you make your payments by opting for accelerated bi-weekly mortgage payments. Not to be confused with semi-monthly mortgage payments (24 payments per year), accelerated bi-weekly mortgage payments (26 payments per year) will not only pay your mortgage off quicker, but it’s guaranteed to save you a significant amount of money over the term of your mortgage. With accelerated bi-weekly mortgage payments, you’re making one additional monthly payment per year. In addition to increased payment options, most lenders offer the opportunity to make lump-sum payments on your mortgage (as much as 20% of the original borrowed amount each year). Please note, however, that some lenders will only let you make these lump-sum payments on the anniversary date of your mortgage while others will allow you to spread out the lump-sum payments to the maximum allowable yearly amount.

3. Can I make lump-sum or other prepayments on my mortgage, or will I be penalized?

• Most lenders enable lump-sum payments and increased mortgage payments to a maximum amount per year. But, since each lender and product is different, it’s important to check stipulations on prepayments prior to signing your mortgage papers. Most “no frills” mortgage products offering the lowest rates often do not allow for prepayments.

4. How do I ensure my credit score enables me to qualify for the best possible rate?

• There are several things you can do to ensure your credit remains in good standing. Following are five steps you can follow: 1) Pay down credit cards. The number one way to increase your credit score is to pay down your credit cards so they’re below 70% of your limits. Revolving credit like credit cards seems to have a more significant impact on credit scores than car loans, lines of credit, and so on. 2) Limit the use of credit cards. Racking up a large amount and then paying it off in monthly instalments can hurt your credit score. If there’s a balance at the end of the month, this affects your score – credit formulas don’t take into account the fact that you may have paid the balance off the next month. 3) Check credit limits. If your lender is slower at reporting monthly transactions, this can have a significant impact on how other lenders view your file. Ensure everything’s up to date as old bills that have been paid can come back to haunt you. Some financial institutions don’t even report your maximum limits. As such, the credit bureau is left to only use the balance that’s on hand. The problem is, if you consistently charge the same amount each month – say $1,000 to $1,500 – it may appear to the credit-scoring agencies that you’re regularly maxing out your cards. The best bet is to pay your balances down or off before your statement periods close. 4) Keep old cards. Older credit is better credit. If you stop using older credit cards, the issuers may stop updating your accounts. As such, the cards can lose their weight in the credit formula and, therefore, may not be as valuable – even though you have had the cards for a long time. Use these cards periodically and then pay them off. 5) Don’t let mistakes build up. Always dispute any mistakes or situations that may harm your score. If, for instance, a cell phone bill is incorrect and the company will not amend it, you can dispute this by making the credit bureau aware of the situation.

5. What amortization will work best for me?

• While the lending industry’s benchmark amortization period is 25 years, and this is the standard that is used by lenders when discussing mortgage offers, and usually the basis for mortgage calculators and payment tables, shorter or longer timeframes are available – to a maximum of 30 years. The main reason to opt for a shorter amortization period is that you’ll become mortgage-free sooner. And since you’re agreeing to pay off your mortgage in a shorter period of time, the interest you pay over the life of the mortgage is, therefore, greatly reduced. A shorter amortization also affords you the luxury of building up equity in your home sooner. Equity is the difference between any outstanding mortgage on your home and its market value. While it pays to opt for a shorter amortization period, other considerations must be made before selecting your amortization. Because you’re reducing the actual number of mortgage payments you make to pay off your mortgage, your regular payments will be higher. So if your income is irregular because you’re paid commission or if you’re buying a home for the first time and will be carrying a large mortgage, a shorter amortization period that increases your regular payment amount and ties up your cash flow may not be the best option for you.

6. What mortgage term is best for me?

• Selecting the mortgage term that’s right for you can be a challenging proposition for even the savviest of homebuyers, as terms typically range from six months up to 10 years. The first consideration when comparing various mortgage terms is to understand that a longer term generally means a higher corresponding interest rate. And, a shorter term generally means a lower corresponding interest rate. While this generalization may lead you to believe that a shorter term is always the preferred option, this isn’t always the case. Sometimes there are other factors – either in the financial markets or in your own life – that you’ll also have to take into consideration when selecting the length of your mortgage term. If paying your mortgage each month places you close to the financial edge of your comfort zone, you may want to opt for a longer mortgage term, such as five or 10 years, so that you can ensure that you’ll be able to afford your mortgage payments should interest rates increase. By the end of a five- or 10-year mortgage term, most buyers are in a better financial situation, have a lower outstanding principal balance and, should interest rates have risen throughout the course of your term, you’ll be able to afford higher mortgage payments.

7. Is my mortgage portable?

• Fixed-rate products usually have a portability option. Lenders often use a “blended” system where your current mortgage rate stays the same on the mortgage amount ported over to the new property and the new balance is calculated using the current rate. With variable-rate mortgages, however, porting is usually not available. This means that when breaking your existing mortgage, a three-month interest penalty will be charged. This charge may or may not be reimbursed with your new mortgage. While porting typically ensures no penalty will be charged when you sell your existing property and buy a new one, it’s best to check with your mortgage broker for specific conditions. Some lenders allow you to port your mortgage, but your sale and purchase have to happen on the same day, while others offer extended periods.

8. If I want to move before my mortgage term is up, what are my options?

• The answer to this question often depends on your specific lender and what type of mortgage you have. While fixed mortgages are often portable, variable are not. Some lenders allow you to port your mortgage, but your sale and purchase have to happen on the same day, while others offer extended periods. As long as there’s not too much time between the sale of your existing home and the purchase of the new home, as a rule of thumb most lenders will allow you to port the mortgage. In other words, you keep your existing mortgage and add the extra funds you need to buy the new house on top. The interest rate is a blend between your existing mortgage rate and the current rate at the time you require the extra money.

9. What steps can I take to help ensure I don’t become a victim of title or mortgage fraud?

• The best way to prevent fraud is to be aware of how it’s committed. Following are some red flags for mortgage fraud: someone offers you money to use your name and credit information to obtain a mortgage; you’re encouraged to include false information on a mortgage application; you’re asked to leave signature lines or other important areas of your mortgage application blank; the seller or investment advisor discourages you from seeing or inspecting the property you will be purchasing; or the seller or developer rebates you money on closing, and you don’t disclose this to your lending institution. Sadly, the only red flag for title fraud occurs when your mortgage mysteriously goes into default and the lender begins foreclosure proceedings. Even worse, as the homeowner, you’re the one hurt by title fraud, rather than the lender, as is often the case with mortgage fraud. Unlike with mortgage fraud, during title fraud, you haven’t been approached or offered anything – this is a form of identity theft. Following are ways you can protect yourself from title fraud: always view the property you’re purchasing in person; check listings in the community where the property is located – compare features, size and location to establish if the asking price seems reasonable; make sure your representative is a licensed real estate agent; beware of a real estate agent or mortgage broker who has a financial interest in the transaction; ask for a copy of the land title or go to a registry office and request a historical title search; in the offer to purchase, include the option to have the property appraised by a designated or accredited appraiser; insist on a home inspection to guard against buying a home that has been cosmetically renovated or formerly used as a grow house or meth lab; ask to see receipts for recent renovations; when you make a deposit, ensure your money is protected by being held “in trust”; and consider the purchase of title insurance.

10. How do I ensure I get the best mortgage product and rate upon renewal at the end of my term?

• The best way to ensure you receive the best mortgage product and rate at renewal is to enlist your mortgage broker once again to get the lenders competing for your business just like they did when you negotiated your last mortgage. A lot can change over a single mortgage term, and you can miss out on a lot of savings and options if you simply sign a renewal with your existing lender without consulting your mortgage broker.

Feel free to ask us any of these questions above at 905-357-5366 or visit our website http://www.beatthebankmortgage.ca email us at btb@beatthebnakmortgage.ca

Niagara Falls (Main Office)

2895 Unit 8 St. Paul Street
Niagara Falls L2J 3A4
Phone: 905-358-5366 Fax: 905-357-6654 Toll Free 1-877-357-5366
Email: btb@beatthebankmortgage.ca

Niagara Falls (Chippawa)
8182 Cummington SQ. W
Niagara Falls On L2G 6V9
Phone: 905-295-5366 Fax: 905-357-6654 Toll Free 1-877-357-5366
Email btb@beatthebankmortgage.ca

Thorold Office
18 Albert St, E
Thorold, Ontario L2V 1P1
Phone: 905-680-5363 Fax: 905-680-8408 Toll Free 1-877-357-5366
Email btb@beatthebankmortgage.ca

Give DLC BTB Mortgage Solutions a Call today at 905-357-5366

or apply online right now

BTB Mortgage Solutions

10 Most Commonly Asked Mortgage Questions

1. What’s the best rate I can get?

• Your credit score plays a big part in the interest rate for which you will qualify, as the riskier you appear as a borrower, the higher your rate will be. Rate is definitely not the most important aspect of a mortgage, however, as many rock-bottom rates often come from no frills mortgage products. In other words, even if you qualify for the lowest rate, you often have to give up other things such as prepayments and porting privileges when opting for the lowest-rate product.

2. What’s the maximum mortgage amount for which I can qualify?

• To determine the amount for which you will qualify, there are two calculations you’ll need to complete. The first is your Gross Debt Service (GDS) ratio. GDS looks at your proposed new housing costs (mortgage payments, taxes, heating costs and 50% of strata/condo fees, if applicable). Generally speaking, this amount should be no more than 32% of your gross monthly income. For example, if your gross monthly income is $4,000, you should not be spending more than $1,280 in monthly housing expenses. Second, you will need to calculate your Total Debt Service (TDS) ratio. The TDS ratio measures your total debt obligations (including housing costs, loans, car payments and credit card bills). Generally speaking, your TDS ratio should be no more than 40% of your gross monthly income. Keep in mind that these numbers are prescribed maximums and that you should strive for lower ratios for a more affordable lifestyle. Before falling in love with a potential new home, you may want to obtain a pre-approved mortgage. This will help you stay within your price range and spend your time looking at homes you can reasonably afford. 

3. How much money do I need for a down payment?

• The minimum down payment required is 5% of the purchase price of the home. And in order to avoid paying mortgage default insurance, you need to have at least a 20% down payment. 

4. What happens if I don’t have the full down payment amount?

• There are programs available that enable you to use other forms of down payment, such as from your RRSPs, a cash-back product, or a gift.

5. What will a lender look at when qualifying me for a mortgage?

• Most lenders look at five factors when determining whether you qualify for a mortgage: 1. Income; 2. Debts; 3. Employment History; 4. Credit history; and 5. Value of the Property you wish to purchase. One of the first things a lender will consider is how much of your total income you’ll be spending on housing. This helps the lender decide whether you can comfortably afford a house. A lender will then look at your debts, which generally include monthly house payments as well as payments on all loans, credit cards, child support, etc. A history of steady employment, usually within the same job for several years, helps you qualify. But a short history in your current job shouldn’t prevent you from getting a mortgage, as long as there have been no gaps in income over the past two years. Good credit is also very important in qualifying for a mortgage. The lender will also want to know that the house is worth the price you plan to pay.

6. Should I go with a fixed- or variable-rate mortgage?

• The answer to this question depends on your personal risk tolerance. If, for instance, you’re a first-time homebuyer and/or you have a set budget that you can comfortably spend on your mortgage, it’s smart to lock into a fixed mortgage with predictable payments over a specific period of time. If, however, your financial situation can handle the fluctuations of a variable-rate mortgage, this may save you some money over the long run. Another option is to opt for a variable rate, but make payments based on what you would have paid if you selected a fixed rate. Finally, there are also 50/50 mortgage options that enable you to split your mortgage into both fixed and variable portions.

7. What credit score do I need to qualify?

• Generally speaking, you’re a prime candidate for a mortgage if your credit score is 680 and above. The higher you can get above 700 the better, as you will qualify for the lowest rates. These days almost anyone can obtain a mortgage, but the key for those with lower credit scores is the size of the down payment. If you have a sufficient down payment, you can reduce the risk to the lender providing you with the mortgage. Statistics show that default rates on mortgages decline as the down payment increases.

8. What happens if my credit score isn’t great?

• There are several things you can do to boost your credit fairly quickly. Following are five steps you can use to help attain a speedy credit score boost: 1) Pay down credit cards. The number one way to increase your credit score is to pay down your credit cards so they’re below 70% of your limits. Revolving credit like credit cards seems to have a more significant impact on credit scores than car loans, lines of credit, and so on. 2) Limit the use of credit cards. Racking up a large amount and then paying it off in monthly instalments can hurt your credit score. If there is a balance at the end of the month, this affects your score – credit formulas don’t take into account the fact that you may have paid the balance off the next month. 3) Check credit limits. If your lender is slower at reporting monthly transactions, this can have a significant impact on how other lenders view your file. Ensure everything’s up to date as old bills that have been paid can come back to haunt you. Some financial institutions don’t even report your maximum limits. As such, the credit bureau is left to only use the balance that’s on hand. The problem is, if you consistently charge the same amount each month – say $1,000 to $1,500 – it may appear to the credit-scoring agencies that you’re regularly maxing out your cards. The best bet is to pay your balances down or off before your statement periods close. 4) Keep old cards. Older credit is better credit. If you stop using older credit cards, the issuers may stop updating your accounts. As such, the cards can lose their weight in the credit formula and, therefore, may not be as valuable – even though you have had the cards for a long time. Use these cards periodically and then pay them off. 5) Don’t let mistakes build up. Always dispute any mistakes or situations that may harm your score. If, for instance, a cell phone bill is incorrect and the company will not amend it, you can dispute this by making the credit bureau aware of the situation.

9. How much will I have to pay for closing costs?

·         As a general rule of thumb, it’s recommended that you put aside at least 1.5% of the purchase price (in addition to the down payment) strictly to cover closing costs. There are several items you should budget for when it comes to closing costs. Property Transfer Tax is charged whenever a property is purchased. The tax will vary from jurisdiction to jurisdiction, but I can help with the calculation. GST/HST is only charged on new homes, and does not affect homes priced at less than $400,000. Even homes that exceed the price threshold are only taxed on the portion that exceeds $400,000. Certain conditions may apply. Please contact you lawyer/notary for more detailed information. Your lawyer/notary will charge you a fee for drawing up the mortgage and conveyance of title. The amount of the fee will depend on the individual that you use. The typical cost is $900. If you’re purchasing a single-family home, you’ll need to give your lender a survey certificate showing where the property sits within the property lines. Some exceptions are made, however, on low loan-to-value deals and acreage properties. A survey will cost approximately $300-$350, but the lender will often accept a copy of an existing survey. Other costs include such things as an appraisal fee (approximately $200), title insurance and a home inspection (approximately $350).

10. How much will my mortgage payments be?

• Monthly mortgage payments vary based on several factors, including: the size of your mortgage; whether you’re paying mortgage default insurance; your mortgage amortization; your interest rate; and your frequency of making mortgage payments. You can view some useful calculators to specific mortgage payments:
• https://www.facebook.com/DLCBTBMortgageSolutions/app_208587489207434 

Also visit us online at http://www.beatthebankmortgage.ca 1-877-357-5366 btb@beatthebankmortgage.ca

Why use a licenced mortgage agent ?

There are generally two ways to get a mortgage in Canada: From a bank, or from a licensed mortgage professional.

While a bank only offers the products from their particular institution, licensed mortgage professionals send millions of dollars in mortgage business each year to Canada’s largest banks, credit unions, and trust companies … offering their clients more choice, and access to hundreds of mortgage products!

As a result, clients benefit from the trust, confidence, and security of knowing they are getting the best mortgage for their needs.

Mortgage professionals work for you, and not the banks; therefore, they work in your best interest. From the first consultation to the signing of your mortgage, their services are free. A fee is charged only for the most challenging credit solutions, and it’s especially under those circumstances that a mortgage professional can do for you what your bank cannot.

Whether you’re purchasing a home for the first time, taking out equity from your home for investment or pleasure, or your current mortgage is simply up for renewal, it’s important that you are making an educated buying decision with professional unbiased advice.

Visit us online at http://www.beatthebankmortgage.ca or call tollfree 1-877-357-5366 email me at btb@beatthebankmortgage.ca