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Posted Money saving tips

A look back at Oct 2008 and the Bank’s kool-aid..

October 2008 will be remembered for a few reasons….. First, it was Obama’s rise to the presidency… the first black American president…. next, it was also the end of Lehman Brothers investment bank and the beginning of one of the biggest global recessions in modern history…

That’s how most of us will remember October 2008….. but  there was also another very memorable event that took place.  You see, it was around this time that I heard some borrowers were getting calls from their Bank to lock-in their Variable rate mortgages…. or to take a long term fixed rate mortgage to ‘protect themselves from the uncertainly’ that surrounded the markets at the time…. I warned mortgage borrowers to expect a call  from their Bank offering a ‘safer mortgage option’ or some ‘special offer’ to lock into a fixed rate or a long-term rate…and NOT to take such offers or deals….

Can you imagine a Bank advising or recommending that you lock in your Variable rate or to take a long-term Fixed rate at that time?    At the time, Variable rates were are at around 3.35% and 5 year fixed rates were at around 5.75%.   Uh, no thank you… I’ll pass on the bank kool-aid.

The funny thing about uncertainty is that it usually brings us lower interest rates…..not always, but during this time we knew the World Banks would work together to lessen the economic impact of the Lehman Brothers collapse.   Unfortunately, there were far too many borrowers that listened to their banker and locked into the much higher Fixed rates…

The moral of the story is that Bankers and their ‘Mortgage Specialists’ work for one company, one Bank… they can only offer you one set of products and MUST do what’s in the BEST interests of their BANK…. They have to drink the Bank koolaid….   Mortgage Brokers can offer the products from dozens of lenders and can also compare the benefits and differences between Banks… Remember to ask questions and opinions from neutral, unbiased professionals.

Don’t drink the kool-aid…

Posted 2 Comments on Your mortgage is paid? Beware of mortgage fraudsters…. Mortgage News

Your mortgage is paid? Beware of mortgage fraudsters….

“You’ve worked hard all your life… your house is finally paid off.  You decide to it’s time to get a smaller house, maybe a condo or you just want travel.  Does this sound like someone you know?  You sell your home but discover that someone has registered a mortgage on your house without you knowing it.  Sound impossible?  Guess again… this is Mortgage Fraud and it’s happening now.”

I wrote that back in 2006.  Since then we have seen some provincial governments step in with laws to protect unsuspecting homeowners….  You can also purchase Title insurance to protect you as well.    But once you have been victimized by the crooks, you still need to make a claim and go through the hassle of clearing things up…. Who wants to go through making a claim? This takes time and can be a big paid in the rear. 

What if there was a way to make yourself less of a target?   The good news is there is a better way to protect yourself….. The criminals go after homes that have no mortgage.  This is PUBLIC information.  Anyone can find out if you have a mortgage just by going to the Land Registry Office and doing a search.   So what should you do?

The solution is to register a mortgage on your home.  This doesn’t mean you need to borrow money.  By getting a secured line of credit you will have a collateral mortgage registered.  The criminals will not know if you have a balance on that mortgage or if it’s $0.   And they will probably go searching for the next home that has no mortgage.

What makes this product unique is that it is available to both salaried and self-employed individuals that cannot prove their income.  If you don’t use it, it doesn’t cost you anything.  

Let me know if you would like more details about this.

Posted Interest rates

Mortgage refinances are down nearly 40%.

Mortgage refinances are down in Canada according to CMHC…. No big surprise to those of us in the Mortgage industry…   The govt has made it more difficult to access money over the past 3 years with all the Mortgage rule changes.    They have accomplished their goal of trying to discourage us from borrowing more.

Here’s a look at some of the rule changes that made an impact:

-mortgage refinances are capped at 85% loan to value from 95% loan to value just a few years ago.

-maximum amortization for hi-ratio mortgages (over 80% loan to value) is 30 years.  Down from 40 years.

-variable rate mortgages and mortgages with terms less than 5 years must be qualified at the Bank’s POSTED 5 year fixed rate… this too will squeeze out many more borrowers as it forces us to qualify at the much higher POSTED rate…. 5.39% vs a discounted fixed rate of 3.49%….

The Banksters are happy to see you take the much higher 5 year fixed rate vs the lower, Variable rate (current Variable is hovering around 2.40%… RBC is advertising their  and Bank’s are advertising their 5 year fixed rate special offer at 4.24%…..).   Banks make more money on the 5 year fixed vs the Variable rate.  Remember that when choosing your next mortgage term.

Oh, and by the way, there are better Fixed rates out there…  we are currently seeing 3.49% for 5 years from the wholesale market.

Posted Mortgage News

U.S. govt suing banks for $196billion for bad mortgages.

FHFA, the US housing agency, is suing 17 banks for selling toxic mortgage backed securities.  Another sign that the fallout from the October 2008 mortgage crisis is not completely behind us.    The lawsuit is for is for a staggering $196 billion.

Just to give you an idea of what that number compares to…. In Canada, it is estimated that we have around $1 trillion in outstanding mortgages…

The reality of these types of lawsuits is that it will cause some uncertainty in the market… and remember, uncertainty usually means a low-interest rate environment..

Posted Mortgage News

More Banks raise their variable rates

BMO has joined RBC in raising their Variable rate mortgage pricing. The Financial Post reports that BMO raised their Variable rate mortgages from Prime 015% to Prime less 0%.

Can you say, ‘we want to force borrowers into the more profitable 5 year fixed rate products’???  That’s right.. The Banks would rather see you in a 4.00% rate vs. a 2.25% rate…  And why not?  They are a business after all.

We have also just received reports from other wholesale lenders that they will raise their pricing as well…  If you were looking at buying a house, refinancing your mortgage or had a mortgage coming up for renewal in the next 4 months, I would suggest you speak with your Mortgage Broker and get some rates locked in…

It’s important to understand, the Bank of Canada is not likely to raise their rate anytime soon.   Bank Prime remains at 3.00%.  We are seeing the Bank Economists tell us they think the economy will remain slow… The Banks do not make as much profit with the low Variable rate mortgages… They want and prefer you to take a 5 year fixed.. these are the most profitable mortgage products for them.

So  the bad news is Lenders will raise their Variable rates slightly, the good news is that we are probably going to continue to enjoy mortgage rates under 3.00% for some time to come…..