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Posted Mortgage News

Taking a look at Reverse Mortgages

Retirement means different things to different people.   One thing we can all agree on is that we don’t want to run out of money…

Reverse Mortgages seem to be gaining some attention in the media again…. I thought it might be worth bringing or sharing some thoughts… here’s a recent article.

A Reverse Mortgage will give a lump sum of cash or monthly payments for life or a combination of both… it’s all tax free money…. Ok, that does sound good..

But upon closer inspection, we see that the interest rate is around 2% to 3% higher than what you can borrow money at for similar fixed rate products.  5.90% vs. 3.50%. Remember, you are borrowing money and NOT paying it back.. the interest just accumulates and compounds…   there are also appraisal fees, administration fees, legal fees… and if you want to sell your home and pay this off, you face huge penalties that could range from 11 months worth of interest to 4 months of interest….Yikes!

Another alternative would be to borrow a secured line of credit at Prime plus 0.50% with interest only payments…. currently, that rate would be 3.50%….

I remember when these products came out in the mid ’90s.. they were horrible… they have changed and rates are a little better, but my advice is talk with a qualified Mortgage Broker or Financial Planner before making any decision…

My last thoughts… I wouldn’t put my parents into one of these products…..

Posted Case study

Deloitte report on Mortgage Brokers.. 38% use brokers

Here’s a great report that was put out by Deloitte. The report shows that Canadians rely on Mortgage Brokers more than ever… but not as a last resort.

Unlike the U.S., where mortgage brokers used to account for 65% of all mortgages arranged prior to the October 2008 mortgage crisis, U.S. broker now account for less than 20% of mortgage business.

Here in Canada, 38% of all mortgage originations went through a mortgage broker…. including  44% of First Time home buyers.

With national and provincial organizations like CAAMP (Canadian Association of Accredited Mortgage Professionals) and IMBA (Independent Mortgage Brokers Association), Mortgage Brokers play a vital role in informing and educating borrowers.    Mortgage Brokers aren’t just a last resort, they are now viewed as a first choice for getting unbiased and professional advice.

Dare we say it, a mortgage broker helps to create competition….and isn’t competition good for the consumer?

Posted 5 Comments on CREA and Competition Bureau reach agreement on MLS Real Estate Trends

CREA and Competition Bureau reach agreement on MLS

A deal was struck earlier this week that will make it easier for seller’s to list their homes on MLS… The Competition Bureau hopes we will see some changes in real estate commissions….click here for the CBC article.

Currently, a seller pays 5% or 6% to sell their home… and that’s been the standard for many years… But with new technology and the internet, we have seen For Sale By Owner companies popping up everywhere.    These companies have not been able to access MLS without employing a realtor.

We all want to save money and pay less… but there is a saying…’you get what you pay for’..    For some, paying a reduced flat fee, and handling viewings, the negotiations, etc, could be worth savings…. but others may not have the expertise, the knowledge or the time to deal with this….

In the end, I think choice is good.   It remains to be seen how many people will move away from the traditional real estate agent and handle things on their own…   Just beware of something that sounds too good to be true…

 

Posted 6 Comments on Update on TD Collateral mortgage rules Mortgage News

Update on TD Collateral mortgage rules

A few weeks ago, we heard from a source that  TD Canada Trust was making a major change in their Mortgage Lending policy.    ALL  new mortgages would be registered as a collateral mortgage instead of as a conventional mortgage…. previously, only secured lines of credit were registered as collateral mortgages.

By the way, here is a great article from Gail Vax-Oxlade, a well known personal money manager…..she would never take one of these new mortgages with TD… I think she is right on the money with her comments and analysis. Continue reading “Update on TD Collateral mortgage rules”

Posted Interest rates

Bank of Canada takes a pause with rate hikes

Bank of Canada governor, Mark Carney, held the Target Rate steady today…as expected…  Concerns about the U.S. economic recovery stalling, the Global economy and our own domestic economy were mentioned in the Press Release.

In the press release, the Bank said inflation was not a concern as it is under the 2% target.  Take all this data and it spells UNCERTAINTY.

What’s also interesting is that the Bank has adjusted it’s forecast for growth downward for the next 2 years…Great news for those in a Variable rate… Variable rates are hovering around 2.30% these days.

This makes the Variable Rate product that much more attractive…even with 5 year fixed rates in the 3.59% range.

Experts believe the rate will remain steady throughout next Spring and possibly into Fall depending on inflation and Global and domestic economic data….

Click here for the Press Release.