Skip to content

CategoryMortgage News

Posted Money saving tips

Scotiabank to buy ING….how will this affect you?

Earlier this month, ING Groep, the Dutch financial services giant, announced they were looking to sell their Canadian and UK operations in order to raise cash.   ING received a $10billion euro bailout from the Dutch govt during the 2008 Financial crisis and they want to start paying it back.

It didn’t take long to find a buyer for the Canadian operations.  Scotiabank will buy the Canadian division of ING for around $3billion.   The press release hinted at some good news for the Canadian public.  Scotiabank will continue to run ING as a separate entity.  For mortgage clients, this is mainly good news…. but we do have some concerns… Continue reading “Scotiabank to buy ING….how will this affect you?”

Posted Interest rates

Lenders chop rates again… 2.99%… and Variable rates at Prime less 0.35%!

Today we saw 2 announcements….   For the first time ever, we saw a 5 yr fixed rate being offered for 2.99%.    This is not a No Frills mortgage… so you don’t have to worry about minimal prepayment privileges, or restricted payout options, and no monkey business when it comes to penalty calculation….  You probably won’t see a lot of publicity about this because of the mainstream media was quick to promote the BMO NO FRILLS mortgage as the first 5 yr fixed mortgage under 3.00%….earlier this year.   But I can tell you, it’s a significant milestone.

And we also saw the introduction of the lowest Variable rate mortgage in almost a year… Prime less 0.35%, or 2.65%.   This isn’t one of those NO FRILLS Variable rate mortgages that is full of restrictions… you have all the regular options including being able to lock into the BEST discounted fixed rate at any time.

These 2 offers are very special…   They don’t come with hidden clauses or back door penalties, or exit fees.   These products are legit!

The driver behind the pricing is competition, the increased spread in profit margins and a slowing housing market..   The thirst to grow a business and keep the business on the books is going to see a lot of competition…. and the winners are us… the borrowers…

If you want more info on these rates or other mortgage related issues, call me anytime.

Steve Garganis

416 224 0114

 

 

Posted Interest rates

2.89% 5yr fixed rates are available… but are those offers legit…?

You’ve heard the saying, “there are no free lunches”…. or “if it sounds too good to be true, it usually is”.…  I’m not sure how these sayings got started but they probably came from a bad experience…  My favorite is, “the problem with things that are free, is that they cost too much”.…   These sayings can be applied to most things in life…   including your mortgage.

Recently, I’ve seen a growing number of websites and radio ads offering these so-called “great mortgage products” at 2.99% and now 2.89% for 5 yrs… A number of readers have asked me if these offers are legit?  Here’s what I tell them…. Hope you find this useful…

In short, the rates are real but the product offerings come with too many strings attached for my liking….. things like the rates are for CMHC insured mortgages only… or the rates are only held for 30 or 60 days….you can’t pay the mortgage off for the first 3 years…. limited prepayment privileges…..prepayment penalties are far higher than other mortgages….you lose your ability to negotiate a rate if you have to refinance the mortgage.

These product have, and can, end up costing you more in the end.   This is why you won’t see me promoting or advertising these rates.

A CLOSER LOOK AT WHAT THESE PRODUCTS ARE ABOUT

In trying to capture market share, some Lenders have created products with slightly lower rates… Ok, I like that part of it…. BUT, they come with inferior terms and restrictions…… and this is where you could end up paying big time, on the back-end of these mortgages.    You’ve seen my previous articles about $20k, $25k, and $30k in mortgage penalties….. This is what makes these products and other NO FRILLS mortgages a bad option…and why I refuse to endorse them.

Let’s face it, the first thing most of us look at is the price… If I said you can buy and iPad for $200, or a 65″ Plasma TV for $500, you would keep listening… In the case of mortgages, we look at rate… 2.89%….  But hopefully, you keep asking questions.  9 times out of 10, you would probably find out there is a catch….. Maybe you have to buy something else, or the make and model is older or of a very poor quality, or the sale was only for a limited time, or it’s a refurbished model, etc….  You get the picture…

In most cases, those offers are just bogus.   The headlines are there to catch our attention… They want to entice you…to get you in the front door or to make that phone call, or to click that link on your computer….The seller is hoping that either 1 out of 10 will not ask too many questions and take the product… or they will shift you into another product… The old bait and switch….  That’s how most of this type of advertising works.  It’s a numbers game…

And it isn’t any different with mortgages.  But the problem with mortgages is that we are talking about a very complex financial product.  A mortgage is a loan agreement, a legal contract that will bind you for 5 years, in most cases.   The loan is secured by your house.  Think about that… You are putting up your home as security… you better understand all the terms, obligations, limitations, restrictions, privileges….. most importantly, look at how much it will cost you to exit this product.

Here’s where I have a BIG problem with these flashy ads….  in most cases, the borrower doesn’t even know what questions to ask…  They can’t get all the required info in order to make an informed decision.     We saw a great example of this earlier this year when BMO offered their 2.99% NO FRILLS mortgage… only, they didn’t market it that way… they called it a Low-rate mortgage…   Quite a play on words.  They made it sound like they were doing us a favour by pushing people into these mortgages… but as my readers know, the limitations to this product can and will prove costly for a large number of borrowers….  which is why I gave that product a huge thumbs down.

For those seeking my opinion and advice, I suggest you take a good hard look at these offers…. ask questions…. you’ll probably end up being part of the “9 out of 10 group” that asked too many questions and saved themselves from a mortgage disaster.

Should you need my help or advice, feel free to contact me anytime.   steve@mortgagenow.ca or 416 224 0114.

Steve

Posted 2 Comments on New Mortgage rules start today… but BMO study says Canadians pay their mortgages in 15 yrs! Mortgage News

New Mortgage rules start today… but BMO study says Canadians pay their mortgages in 15 yrs!

  The govt’s new mortgage rules go into effect today… well, actually, most Lenders put them into effect a week ago to ensure they had enough time to process applications already in the pipeline.

The new rules are supposed to help us pay our mortgage off faster, make it tougher to borrow money and slow the housing market which in turn will save us from a housing bubble.   And this is also supposed to help lower our personal debt levels.   It all sounds great, but the govt has not provided us with any real data to suggest that we need saving from ourselves.

In fact, a new BMO study shows that Canadians are paying off their mortgages in 15 years or less.   Does that sound like a bunch of irresponsible borrowers?   And there is a lot more data out there that shows over 20% of us are making lump sum payments… and even more are accelerating their payment schedules by increasing their minimum mortgage payments..

If the govt did make a mistake and used a sledgehammer to kill a fly, then let’s hope they will act just as quickly to adjust the rules if their policies were too strong… Let’s hope they will put some sort of review procedure in place to measure the impact of these changes….We already have some pretty tough standards when it comes to borrowing for a house…. maybe we should bring in some rules for Credit Cards or personal loans…  seems like anyone with a pulse can get one of these….

Posted 1 Comment on Part 2 of OSFI’s new mortgage underwriting rules announced Mortgage News

Part 2 of OSFI’s new mortgage underwriting rules announced

Hot topics this week are all the govt changes to mortgage lending…  but before we get into the bad news, I thought I’d start with some positive news…  Interest rates are still at all time lows….  if you have a mortgage or will be getting one soon, today’s rates are lower than ever before…  That means more money in your pocket!   We don’t seem to hear enough about that…

Okay, now for the update…Remember, these changes will affect ALL Federally regulated financial institutions….BUT they won’t affect MOST CREDIT UNIONS and other Lenders..

Yesterday we got a double whammy…  First the Federal Department of Finance announced changes to CMHC insured mortgages.… And later that day, OSFI announced Part 2 of their changes to Residential Mortgage Underwriting Practices and Procedures, better known as RMUP… but I prefer RUMP because that’s exactly where most of us will be feeling the effects of these changes…

The timing of all this tightening puzzles most of us in the mortgage industry.   Canada has been the envy of the world when it comes to our mortgage underwriting practices… The govt seems to be getting more into credit underwriting and procedures than ever before… And yet they have not given us any true data or reason for these changes….

Nevertheless, it’s important to keep up to date as these changes will affect us all.  Part 1 of changes were announced earlier this month through a Draft update on June 6th..   And here are the details of the final changes which come into effect later this year… there is a lot of text in the final draft but we are only focusing on the changes that will have the greatest impact on us:

  • Credit checks should be done more often.. minimum credit scores should not solely relied up to determine a borrower’s credit worthiness.
  • Home Equity Lines of Credit will be limited to 65% loan to value, down from the current 80% loan to value. (still not sure if there will be any grandfathering of existing lines but my guess is no)
  • there is more wording with regards to Lender’s Senior Management having more minimum reporting… (this looked like make-work stuff to me as most Lenders have tons of reporting).
  • Cash-back mortgages are gone (no big deal here…. very few of these products were ever used by us ‘irresponsible Canadians’… )
  • Self-employed individuals will be required to provide and pass an ‘income reasonability’ test… (these already exist with most Lenders)
  • Lenders should use the 5 yr fixed contract rate or the Bank Posted rate when qualifying for Variable rate products…even conventional mortgages… (again, nothing new here.. most Lenders are doing this already….yawn)

Who can blame you if you if you’re having trouble keeping up with all these changes to mortgage rules and lending policies.  We must question the purpose of these changes… little to no proof has been presented with regards to why the govt feels these changes are needed… and the timing may come back to bite them in the RUMP!   Some experts are making the argument that the govt’s attempt to avert a major housing downturn, could actually be the cause of it…..let’s hope not.. only time will tell.

I question why the govt is so focused on the estimated $1trillion residential mortgage market, when we have little or no rules when it comes to the other $500billion of non-real estate debt such as credit cards, loans and lines of credit.   Why is it okay to buy a car with $0 money down or okay to make NO payments for 6 months or 1 year, with interest rates of 8%, 18% and 28%, but if you want to buy or refinance your home, you better be prepared to jump through several hoops?   Can you say, ‘I need to refocus my energy and efforts’?

THE GOOD NEWS

Mortgage Brokers will be much busier with these new changes.   Your traditional Bank and ‘A’ Lender WILL NOT be able to provide the same financing as before…. BUT there are several other Lenders that are ready to fill the gap… including Credit Unions and other non-bank Lenders…..   We could see the small Lenders grow with these changes…  As always, feel free to contact me if you have any questions or need clarification.

Steve Garganis