Rates went up, so now what do you do?

fearOn July 12th, for the first time in seven years, the Bank of Canada increased the overnight rate by .25%, withdrawing some of the stimulus that was needed after the oil price collapse and 2008 financial crisis. Variable rate mortgages and lines of credit will see higher rates and modest payment increases. Fixed-rate mortgage – which are based on the bond market – had already been trending slightly upward, although if you have a fixed mortgage, you aren’t affected until it’s time to renew. Keep in mind that this is a very small increase, and we’re still in an ultra-low rate environment and an incredibly stable market. We’ve also seen increases before to only see them decrease again. But rates have risen, so here are answers to the questions I’m getting:

Should I jump into the market now? Actually, my advice is always the same: buy when you are financially ready. Don’t jump the gun just because rates “may” go higher. But by all means, if you’re thinking about buying, I can arrange a pre-approval so you’re protected from rate increases while you shop around.

Should I lock in my variable rate mortgage ASAP? 
Read the rest of this entry »

Banks pass on rate hikes but not the savings.. Shame on the BANKS!

On January 2015, the Bank of Canada cut the prime rate by 0.25%.  But the BIG SIX BANKS didn’t cut the Prime rate as they normally do.  Instead, they waited a week… tried to justify why they couldn’t cut the rate… and finally caved in and cut it.. but ONLY by 0.15%.

That’s right, they pocketed the remaining 0.10%.  And in case you haven’t heard, the BIG SIX BANKS have been posting record profits, year after year after year after year after year.   In 2016, the 5 most profitable corporations were:

  1. RBC
  2. TD
  3. SCOTIABANK
  4. BMO
  5. CIBC

Read the rest of this entry »

Long term contracts have a price… nothing has changed from 2010

Originally posted in 2010…. some things never change..  enjoy and beware.

Here’s a great article written by consumer advocate, Ellen Roseman.  She points to different industries where signing in for the long term protection can be very costly and expensive.

Ever wanted to change cell phone providers?  How about internet providers?  Move your investments or rrsps?  Cancel that hydro or gas contract because you moved?

And how about mortgages?  When interest rates started heading downward about 12 months ago, thousands of borrowers in fixed rate mortgages wanted to get out of their higher rates and start benefitting from the record low interest rates we have been seeing.

But they were shocked to hear of unbelievably high early prepayment penalties… the example Ellen uses is about a $46k penalty on a $530k mortgage with a major bank…  I’ve seen dozens and dozens of situations like this.

Beware of long term mortgages… with the average person moving or refinancing about every 3 years, choosing a 5 year fixed rate term is usually not the best option.  It could cost you more than you think… always seek professional advice from a reputable mortgage broker before selecting your mortgage.

(Just a personal note… It sure would have been nice to see some mortgage relief given to the average homeowner during the recession.   CMHC used to cap their penalties to 3 months interest but removed this cap in 2000…quietly, all financial institutions are free to charge a higher penalty…and they all do.. the longer the term, the greater the penalty…)

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

Another example of BIG SIX BANK inflated penalty calculation.. $13,634.00! Wow!

big-six-banks1 If you still think your local BANK is your best friend, think again.  Last week, one of my client’s discovered it would cost them $13,634 to exit their mortgage early.  Compared with only $2736 if they had chosen a BETTER mortgage Lender.

Here’s the details..  The clients had a $395,000 mortgage balance remaining.  Renewal date was October 2018.  Original term was 5 yrs and their rate was 2.77%.  The rate is competitive, but not any better than what I could have offered at that time.  There had to pay the mortgage out.

Penalty quote is $13,634.  That’s equal to over 14 months interest!!  Wow!  Incredible.   $13,634 compared to $2736.

I’ve shared many examples similar to this in the past.  It’s really simple.  DON’T FOCUS ON THE RATE!.   There is so much more to choosing a mortgage than just rate.  The average Canadian changes their mortgage ever 3 years.  And there are many reason this happens.. change of job, marital status, family issues, health issues, etc.

And if you are expecting your Banker to show you other products to compare, well, that’s just not gonna happen.  It’s like expecting Ford to send you to Toyota for a new car.  Not gonna happen. Do yourself a favour and speak with an unbiased, neutral professional. Speak with an experienced Mortgage Broker that deals with dozens of Lenders.  You’ll be glad you did.

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

Finally, a tax break on Lander transfer tax.

ontario-govt

Did you get a larger Land Transfer Tax rebate?

If you bought a home this year, and you’re a first time home buyer, then you’ll pay less tax..   The Ontario provincial govt has doubled the rebate from $2,000 to $4,000.   The rebate is for qualified first time home buyers only.

They also eliminated Land Transfer tax on the first $368,000 of the purchase price for first time home buyers.    Hey, this is good news.  And I applaud the govt for giving for giving first time buyers a break.

They also increased the Land Transfer Tax for homes over $2million.  Here’s the old and new tax tables.

“Old” Ontario Land Transfer Tax Rates
Home Purchase Price             Tax Rate
Up to $55,000                                 0.5%
$55,000 to $250,000                    1.0%
$250,000 to $400,000                 1.5%
Above $400,000                             2.0%

And here’s the new formula…

“New” Ontario Land Transfer Tax Rates
Home Purchase Price             Tax Rate
Up to $55,000                                 0.5%
$55,000 to $250,000                    1.0%
$250,000 to $400,000                 1.5%
$400,000 to $2-million                2.0%
$2-million and over                       2.5%

Enjoy the savings..

Kinda strange..  Remember when the Kathleen Wynne govt was considering allowing other municipalities, other than Toronto, to introduce a new land transfer tax?   NO?  Well, I do.. and you shouldn’t forget it either.. click here to remember..  Keep this in the back of your mind .. Let’s hope this isn’t some sort of strategy to catch us with our guard down..

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

Debt diversification vs Debt consolidation…who wins?

debt

ONLY IN CANADA

Attention:  Bankers, close your ears.. we don’t want you to hear this.  Credit card balances, lines of credit, car loan, student loan, home reno loan, personal loan..   If you have one or more of these and you own a home, you’re probably losing money by paying a higher interest rate.  In many cases, $thousands are lost and overpaid each year.   And your Banker is laughing and recording Record profits!!

It’s surprising how many of us have some, or all of these debts… and ALSO a house with lots of equity.  Yet, as Canadians, we somehow think it’s better to separate our mortgage from other debts.  We somehow think it’s good to pay down our mortgage but then rack up other debts.  This attitude has puzzled me for years.

check out this chart for one client.. tell me if this looks familiar: Read the rest of this entry »

Mortgage Brief.. Mortgages rules explained… and why didn’t the govt consult experts?

Bill Morneautrudeau

They say we don’t read emails or articles anymore.. we just skim through them.   But some things can’t be understood with a quick glance.  The new mortgage rules will impact EVERYONE!

If you want to understand how they impact you, continue reading… If you don’t care or want to be oblivious, take the blue pill and move on.

I’ve put together a list of the mortgage rules so that you can understand what they mean and how they will impact you.   Hey, let’s give The Federal govt some credit… they’ve been transparent about a few things, right?:

  • They want house prices to drop.
  • They don’t want anyone to have a mortgage if their home is worth more than $1,000,000.
  • They don’t want you to ever refinance your mortgage.  You should only require a mortgage when you buy a house.
  • They don’t want you to buy a house and rent it out.  You should only buy a rental property if it has 2 or more units.
  • Mortgages should not be amortized for longer than 25 years.
  • They want rates to go way up.

Here’s the official update from our Department of Finance.

Here we go.. Forget the data and stats being reported today.  Those stats don’t matter!  We want to see the stats after March 30th, 2017.

Remember the mortgage rule changes of October 17th?  How about the ones on November 30th?  Get ready, we won’t see the full effect of these changes until after March 30th 2017.

That’s when the last of the mortgage approvals will have closed, that were done under the old rules. And all the new mortgage closings beyond this date, will have had to been qualified with the new rules.  This is when we’ll begin to see the impact of these rules… And we’ll begin to see just how many Canadians will be have been impacted.

If you think I’m wrong, read the rule changes below and tell me what other conclusions you can come up with. Read the rest of this entry »

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