Mortgage brief…Is it worth changing your mortgage today?

Fixed rate mortgageMortgage rates have never been lower.  Should you break your current mortgage to take advantage of the lower rates?   The answer is ‘yes’ and ‘no’.

YES….if the penalty to break your mortgage is less than the potential savings.  We are seeing many opportunities today where it PAYS to break your mortgage and get into today’s lower rates.

EXAMPLE for one client..  Existing mortgage is $275,000.  The existing rate is 2.99% with 3 years to go.  The penalty to exit is $3500.  The current 3 year rate is 2.24%.  Gross savings is $5602.  Net savings is $2102.

NO… if the penalty to break your mortgage is less than the potential savings.   EXAMPLE..  Penalty is $6500 and Gross savings is $5602.  Net loss is $898.

YES… if you think interest rates are going to be much higher in the next few years, you may still want to bite the bullet, pay the penalty and lock into a longer term fixed rate mortgage.   Everyone is different and has different needs, risk tolerances, plans.  This is a personal choice.

I’ve seen examples of both situations.  You could save money by breaking your mortgage.  The best advice is to speak with an experienced Mortgage Broker. Get an UNBIASED opinion.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114


Mortgage brief… New Liberal govt mortgage rule changes..and what it means.

Bill Morneauthumbs down Yesterday, Federal Minister of Finance, Bill Morneau, announced tighter lending rules.  The big focus is on the new ‘stress test’. To sum it up, here’s what’s gonna happen and how it will affect you.

First, let me say this..   IT’S NOT THAT BAD… It will affect those with tighter budgets, but not the vast majority of buyers.


-As of October 17, everyone must qualify using the Bank posted 5 year fixed rate.  Today, that’s 4.64% (well over the discounted 5 yr, which is averaging around 2.59%..lower with most Brokers).

-borrowing less than 80% of the value of your home allows you to extend your amortization to 30 years…. but not any now be capped at 25 years.

There were some other changes, but these are the ones that will affect us most.  So here’s some other facts the media may not be telling you:

-You remember I said it wasn’t that bad?  It’s true.  Over 90% of my clients are qualifying already, using the Bank 5 yr posted fixed rates.  I suspect that most homebuyers can qualify just as well on October 17, as they can today.

-I’ll repeat…Most homebuyers can qualify easily with a 25 year amortization, but choose to extend that to a 30 year amortization as a fail safe or preventative measure, just in case their incomes are affected in the future … job loss, family illness, child school fees, other financial crisis.

-The govt wants to stop house prices from rising in Toronto, Vancouver and other major urban hotspots.   But if you are an investor, earning good income, or have a good down payment, this won’t affect you.   Yes, some homebuyers will no longer qualify under traditional lending policies….

-But watch out for the secondary lenders.  Secondary lenders AREN’T offering loan shark rates, contrary to what the media might have you believe.  They will gain market share as traditional lenders can’t help these borrowers.  I’m talking about financial institutions that specialize in that gray market where borrowers don’t quite qualify but can still afford it.  They will pay 4% or 5%  on their mortgage.  (wasn’t that long ago that 4% was a fully discounted AAA rate).

More on this follow..   stay tuned.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114

US election year… low rates today, but higher rates tomorrow.?

US electionLooking at this pic, aren’t you happy to be living in Canada?    Ok.. back to the article…

September 7th is the sixth of eight scheduled meeting dates for 2016.  The Bank of Canada governor, Stephen Poloz, is expected to leave the rate unchanged.  The Bank of Canada rate affects Bank Prime rates and Variable mortgage rates.  It also affects Fixed mortgage rates, indirectly.stephen poloz

Historically, Canadian mortgage rates have followed the US election year.  As we lead up to an election, rates tend to lower than normal.   And in the months after the election, rates go up.  Not always, but this happens often.

Will this happen in 2017?   Hard to say… however, we’ve seen the US Fed Reserve Chair, Janet Yellen, state that the US rate could go up as soon as Sept 21.

This may or may not happen.   Ms. Yellen has hinted at a looming rate hike for months.   (sort of reminds me of our previous Bank of Canada governor, Mark Carney, making numerous statements of a pending rate hike that didn’t materialize for years).   Be careful, she could be known as “The woman who cried wolf”?

Stay tuned.. the next few months could be a bit of a roller coaster..   And as always, don’t panic.  If you’re not sure, contact an experienced Mortgage Broker for neutral, unbiased advice.

Oh, by the way, did you know we are experiencing the lowest fixed rates in history?  For those that have a mortgage, congrats.  You should be paying less interest than ever before.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114

Tax Free Savings Accounts should be 2nd on your list

There are over 10million TFSA accounts in Canada according to this article in the Financial Post.   Wow, it’s great to see that level of savings….

But hold on… this the right strategy for those of us with a mortgage?    Well, if you have a mortgage on your principal residence and the interest is not tax-deductible, then I think it’s NOT the right strategy.

For most of us, the interest on a residential mortgage is not tax deductible (I say for most of us because if you rent out part of the home or use it for your business then you may be able to claim a tax deduction).

Take those after-tax $$dollars and pay your mortgage first before putting them into a TFSA… reduce the amount of non-deductible debt and then focus on a TFSA….   If you own an investment property, then this strategy may vary slightly…. but for most of us, let’s get rid of that mortgage first…

And yeah, for those higher income earners looking to diversify, then sure.. A TFSA makes sense.  But for most Canadians, I would suggest getting rid of the mortgage is a better strategy.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114

Mortgage Brief… Homebuyer of the future.

the futureThis is the homebuyer of the future…

This past June, Mortgage Professionals Canada published their survey results on the Next Generation of Homebuyers.

Take note: Adults under the age of 40 who don’t currently own a home but expect to own in the future, if you are planning on buying, or help a child get into homeownership, these results can be an interesting comparison to your own situation. Here are some of the key findings:

  • 52% are under 30 years old, 48% aged 30 to 39
  • 55% single, 39% married/living with a partner
  • 81% have no children
  • 72% agree that mortgages are good debt, and 76% agree real estate is a good long-term investment. 58% are optimistic about the economy in the next 12 months.
  • The decision to buy is often influenced by key life events – start a family (33%), getting a promotion/raise (30%), getting married (29%), inheritance (8%).
  • Primary downpayment sources are personal savings (73%), gift/loan from a family member (36%), TFSA (33%) and RRSP (29%).
  • Average downpayment savings is $37,000 among imminent buyers.
  • Neighbourhood (61%), safety (58%), and potential for increase in value (50%) are the most important home features. Features that are considered to be worth a premium are nice neighbourhood (33%), short commute (31%) and safety (29%).

Read the rest of this entry »

Mortgage Brief…BC’s 15% Foreign property tax coming to Toronto?

BC waterfrontAnd it begins in Vancouver… the long-awaited, little debated foreign property tax is about to begin.

Foreigners wanting to buy in Vancouver will need to add 15% to the purchase price..  Put another way, this adds $150,000 to the purchase price of a $1,000,000 property.

The new tax begins August 2nd.   The provincial BC govt says they want to ensure that home ownership remains within the reach of the middle class.  And if it doesn’t then, they say, it has created a new revenue stream.

MY THOUGHTS… Read the rest of this entry »

Mortgage Brief…Bank of Canada doesn’t change rate..

stephen polozThis week, the Bank of Canada Governor, Stephen Poloz, held rates steady.  No increase or decrease. click here for BoC report.

The Bank of Canada meets 8 times a year, at preset meeting dates.   The Target Rate is used by Canadian Banks to set their Prime rate.  This also affects Variable rate mortgages and even influences short term rates.

Bad news is good news for mortgage rates.  Inflation is under 2% (well below the 3% max that is needed before rates climb)..  And the Canadian economic outlook is still not strong enough to support a potential rate increase.

So, for now, enjoy the low rates… actually, they’ll probably be around for a lot longer..

Remember, we are experiencing record low rates.. but this doesn’t mean we should all jump into a 5 yr fixed rate product..  We all have different wants, needs and goals..  Speak with a Mortgage Broker to get professional advice.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114