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AuthorSteve Garganis

As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.

World Debt clock comparison… How’s Canada doing compared with the world?

Debt.  It’s a popular topic.  Personal debt. Govt debt. Corporate debt.  Back in 2013, I published an article comparing Canada’s debt with the rest of the world.  Back then, like today, there was so much negative news being written about our so-called high personal debt level.   I thought I’d turn the tables on the govt and see how they were doing.

Here we are, 2018 and  five years later.  We’re supposedly experiencing fantastic economic times.  Lowest unemployment in 40 years according to the Dec 2017 job report.  Things are so good that we can increase minimum wage by over 30% in Ontario and other Provinces.  We must really be doing great, right? Scorecard time…

The logical conclusion, or the simple math equation is with GOOD TIMES OR A STRONG PROSPEROUS ECONOMY = LOWER NATIONAL DEBT…. Consumers are expected to lower their personal debt levels.  Isn’t the govt supposed to lower or work on eliminating our national debt?  One would think so. Let’s find out… Continue reading “World Debt clock comparison… How’s Canada doing compared with the world?”

Rates are going up… for now… is this the end of low rates?

 Next Wednesday will be the first Bank of Canada meeting date to set the Target rate, which directly affects Bank Prime rate and Variable rate mortgages. It’s almost a certainty that the Bank of Canada Governor, Stephen Poloz, will raise the rates.

POSITIVE DATA MEANS HIGHER RATES

There’s been too much positive economic data lately. Low unemployment levels (5.7%, the lowest since the ’70s), higher spending by consumers, slightly higher inflation (2.1%), record level stock market. We’ve also seen some comments and posturing by the Bank of Canada Govr that suggests we should expect a 0.25% increase.

Bond yields have also been moving steadily upward. Yup, we should expect a rate hike. And depending on how the market reacts to this, we could possibly see another rate hike at the next Bank of Canada meeting on March 7th.

BUT WAIT, IS THIS THE END OF MORTGAGE RATES IN THE 3.00%’s?

Continue reading “Rates are going up… for now… is this the end of low rates?”

Last call for mortgage approvals under the current rules….and an in-depth look at how these new rules will impact YOU in 2018.

 TIME IS ALMOST UP..

With just days to go before the new mortgage rules take effect on January 1st, we are seeing a flurry of mortgage applications.   Panic buying and refinancing is at its peak. And rightfully so..  next year, you will qualify for at least 15% less mortgage.

(TIP… get a preapproval before Dec 31st and it will remain valid for 120 days from the date of preapproval. You do not have to enter into a purchase agreement before Dec 31st.  And if refinancing, you don’t have to close prior to Dec 31st. This is not with all banks.  Call my office for more info.)

LET’S BEAT UP ON THE SELF-EMPLOYED SOME MORE Continue reading “Last call for mortgage approvals under the current rules….and an in-depth look at how these new rules will impact YOU in 2018.”

Recent mortgage fraud in Toronto.. you can prevent it easily.. Read on.

In November, Toronto police said a woman used fake ID to get a $300,000 mortgage.  The unsuspecting homeowner only discovered a mortgage had been fraudulently registered on their home when they received mortgage documents in the mail.

This is not a new scam. It’s happened many times in the past. Here’s a big one from 2010 that involved $140million and hundreds of people.  This one was huge.  Most are not this big or elaborate.  It’s the smaller ones, like the recent one for $300,000, that are more common place.

HOW IT’S DONE

Continue reading “Recent mortgage fraud in Toronto.. you can prevent it easily.. Read on.”

OSFI’s new mortgages rules… a silver lining..

 SEARCHING FOR THE POSITIVE..YES, THERE IS SOME.

Hard to find any positive news from OSFI’s (Office of the Superintendent of Financial Institutions) new mortgage rules announced last week.

In case you missed it.. It just became harder to qualify for a mortgage.  I’m talking about those with more than 20% down payment.  Harder than it’s ever been in my 28 yr career. Harder than I think we’ve ever seen in history.

The old rule of mortgage lending was that if you had a large down down payment of 35% or more, and you had good credit, quality real estate, then you were approved.  You were guaranteed to get a great mortgage.  And rightfully so.  You earned that right.  You built up significant equity.  And the chances of someone defaulting on that mortgage was very slim.

No reason to ask borrowers a long list of questions about their historical earnings, 3 years of income tax returns, Notice of Assessments, blood tests and other bodily fluids (okay, they aren’t asking for bodily fluids or blood.. but it sure feels that way.). Beginning January 1st, 2018, that logic is gone.  Banks will have to put you through the toughest mortgage qualifying process that you’ve ever seen.

I’m not the smartest person, but someone has to explain to me why it should be tougher for someone with more than 20% down, even 50% or 70% down payment, to qualify for a mortgage than someone with 5% down?   This makes no sense.  And there is no logical reason to do this.  Discouraging home ownership or real estate ownership is wrong.

THE SILVER LINING

Here’s that silver lining I was talking about.. Continue reading “OSFI’s new mortgages rules… a silver lining..”

Review your mortgage NOW! Next year may be too late.

It’s begun.  The message is starting to sink in.  The new mortgage rules could eliminate 15% of Canadians from qualifying for a mortgage after January 1st, 2018.  The mad rush has started as mortgage inquiries are up significantly.

WHO WILL BE AFFECTED?

  • Anyone that has a mortgage renewal in next 12 to 20 months.
  • Anyone thinking of buying in the next 12 months.
  • Anyone that is needs or is thinking of refinancing their mortgage in the next 12 months.
  • Rental property owners.  Yes, you too.
  • Future retirees with lots of home equity (newsflash..the new rules don’t take into consideration how much equity you have in your home.. your net worth is also irrelevant… it’s all about how much income you earn and declare…)

All of these borrowers will be affected.  If you’re not getting the message, anyone with a mortgage should be getting a review done NOW.  Don’t wait until next year.  You may not qualify for a mortgage.

EXPECT HOME SALES TO SPIKE UP TEMPORARILY Continue reading “Review your mortgage NOW! Next year may be too late.”

OSFI announces strictest mortgage rules ever… what you need to know.

HARDER TO QUALIFY WITH 50% DOWN THAN WITH 5% DOWN.. DOES THIS MAKE SENSE?

October 2016, our Federal govt announced a number of new mortgage rules including the infamous new ‘stress test’ for all insured mortgages.  Mortgage default insurance is required for all mortgages greater than 80% loan to value.  You have to qualify at the bank posted 5 yr fixed rate, which is usually around 1.75% to 2.00% higher than your actual rate, and with a maximum amortization of 25 yrs max.

These ‘rules’ were brought in last year to protect us from ourselves.   To ensure we could handle any large interest rate hikes at renewal time.  Sort of like big brother watching over us to make sure we don’t borrow more than we can afford. (btw, we already had lending rules in Canada.  Our mortgage arrears were and still are at record low levels.   Seems like our Banks, credit unions and other lenders are doing a pretty good job of lending.  Is more govt intervention necessary?  Most experts say no.)

Today, Jeremy Rudin, OSFI Superintendent, joined the party…. well, more like rained all over ever Canadian homeowner’s party (current and future).   OSFI, not wanting to be left out, announced they would impose more mortgage rule tightening for all mortgages that were UNDER 80% loan to value.    Again, to protect us from ourselves just in case interest rates should sky rocket at your renewal time.   Here’s a summary of the changes and how they will impact consumers, homeowners, and the real estate market:

  • A new minimum qualifying rate for uninsured mortgages.  The ‘stress test rate’ will be your contract rate + 2.00% or the 5 yr posted fixed rate, whichever is greater.(that’s right, your may have to qualify at a higher rate than those with insured mortgages above 80% loan to value.. how does that make sense?)
  • Federally regulated financial institutions must establish and adhere to appropriate Loan to value limits that are reflective of risk and updated as housing markets and the economic environment evolve (yeah, I’m not quite sure what this one means either.. stay tuned)
  • Federally regulated financial institutions are prohibited from arranging with another lender a mortgage, or combination of a mortgage and other lending products, in any form that circumvents the institution’s maximum Loan to value ratio or other limits in its residential mortgage underwriting policy. (this has dire consequences for those that won’t meet this historic new ‘stress test’.. effectively, the govt is telling you to not buy a home if you don’t fit in this new shrinking qualifying box…. or sell your home if you need to access the equity..)

 

HOW THIS AFFECTS YOU

  • buying with less than 20% down payment, no effect.  You already have a ‘stress test’.
  • buying with more than 20% down and you’ll have to pass a tougher test, that’s right, a tougher test than those with less than 20% down.  (Make any sense to you?  me neither.)
  • around another 15% of homeowners will NO longer qualify for a mortgage regardless of it being a purchase or if you wanted to refinance.
  • expect rental, condos or houses to become way more expensive as demand will spike.
  • we’ll see a spike in real estate sales from now until Jan 1st as homebuyers will scramble to get in prior to the new rules taking effect.
  • most credit unions are provincially regulated and for now, won’t be affected..  (that could change if the provinces amend their rules)

 

POSSIBLE SOLUTION TO DISCOURAGE HOME SPECULATORS BUT ENCOURAGE HOME OWNERSHIP

If you want to discourage speculators, make them hold the property for 5 or 7 years.  Bring in a declining speculation tax for anyone that sells a non-owner occupied home in less  than 5 years.  Reward those that hold real estate for longer periods.  You’ll have less transactions.  Encouraging longer holding times, more rental units on the market and higher vacancies.  More rental supply will also resolve high rents.  Bring back more realistic mortgage qualifying guidelines.  Encourage and promote buying investment properties.

A year ago, the Federal govt made several rule changes that effectively made it more expensive and difficult for consumers to borrow.  The list of changes was so long that most Canadians didn’t bother to react because it didn’t affect them that day.  But as we are seeing now, more consumers are experiencing reduced access to mortgage money.   They can’t refinance their mortgage.  They can’t draw on their built up equity in their homes.  It’s only when you need to borrow do you realize the extent of the changes.  Each and every one of us will be impacted.   These new policies will only make home ownership more difficult.  It will also slow our economy.

Perhaps the credit unions can pick up the slack and help …  stay tuned.. there will be more to share on these changes.     One thing is for certain.  You need to speak with an experienced Mortgage broker to understand what your options are.  It’s almost impossible to go it alone.. and you don’t have to.  Mortgage Brokers work for you, not the Bank.  They have access to dozens of competing lenders.

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 steve@mortgagenow.ca

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