CategoryMortgage Trends

Posted October 4, 20162 Comments Bank News

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

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.

NEW RULE:

-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 longer..it 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).

Mortgage Brief… Homebuyer of the future.

This 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%).

Continue reading “Mortgage Brief… Homebuyer of the future.”

Posted June 21, 2016 Mortgage News

New record low fixed rates… how low can they go?

5 yr fixed rates just got better. With last weeks U.S. Fed chair, Janet Yellen, saying these low rates are the ‘new normal’, the markets reacted.

Bond yields are down and that has moved fixed rates lower. The best full featured, no handcuffs 5 yr fixed rate is 2.49% (yes, some fast closing specials exist but 2.49% is the best today). (oh, by the way, Yellen wasn’t the first govt rep to say this. Our own Senior Deputy Governor for the Bank of Canada, Carolyn Wilkins, said this 2 yrs ago.. Go Canada!)

Hard to believe they keep going lower. Does that mean we should jump into a 5 yr fixed? For some, yes. But for many of us, no. For over a decade, I’ve recommended Variable rate or a short term priced products. History has proven that short term priced products result in lower cost to the borrower.

However, there is something to be said for peace of mind. Many of us want to set it and forget it. For those that can’t sleep at night or for those that are borrowing to invest, then perhaps, 5 yr fixed makes sense.

If you really want to know what’s best for you and your situation, you must speak with an unbiased mortgage professional. A Mortgage Broker doesn’t work for any one Bank. They work for you. They will give you unbiased, neutral advice and they can offer hundreds of different products.

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

Posted June 1, 20161 Comment Money saving tips

Short term fixed products are still in…

SHORT TERM RATES ARE STILL IN

A few months ago, I said Variable was out, Fixed rates were in. I recommended going with a short-term fixed rate products. The reasons are simple:

You can get the same or better in a 2 and 3 yr fixed rate term. That eliminates the Variable rate for me.
2 yr is 2.19% and 3 yr is 2.29%.
Variable is 2.30% today. Why choose a fluctuating rate when you can get a guaranteed better rate for the next few years?
I also don’t like the current Variable rate pricing that’s out there.
Prime less 0.40% isn’t good enough.. I like to see Prime less 0.50% or better.

Historically, we’ve always done better by choosing short-term rates. And that’s what Variable rates are…A mortgage product priced from short-term funds. The only difference today, is that it makes more sense to lock into 2 or 3 yr fixed term vs choosing a Variable rate.

WARNING

( you’ll see lower rates advertised.. but be careful. There are so many NO FRILLS products or products that carry inflated penalty calculations, limited repayment options and other hidden fees.. stay away from those)

MORTGAGE TIP

Hey, want to know which Mortgage Advisor to use? Check out their historical recommendations and forecasts. That should tell you all you need to know about that advisor. And if you can’t readily find those historical forecasts, then walk away and look elsewhere.

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

Posted May 31, 2016 Interest rates

Should you look at 10 year fixed rate mortgages?

Today, right now, we are experiencing all-time record low fixed mortgage rates. Great news if you need a mortgage. And some of you may be thinking of locking into a longer term mortgage. Let’s take a look at that option.

Going longer could be an option for some. The Best 5 yr fixed is around 2.59%.. some special deals exist for larger mortgages or faster closings… but let’s use 2.59% for now. Does it make sense to pay 0.30% more for the first 3 years of your mortgage, just for the benefit of knowing what your rate will be for the last 2 years?

(a warning… you’ll see lower rates advertised.. but be careful. There are so many NO FRILLS products or products that carry inflated penalty calculations, limited repayment options and other hidden fees.. stay away from those)

Continue reading “Should you look at 10 year fixed rate mortgages?”