TagBank of Canada

Posted August 8, 2014 Money saving tips

But it came in a beautiful box?!

If I gave the option of choosing between 2 cell phones, which would you choose? Both phones had similar specs and were identical in almost every way… except PHONE 1 came in a nicely gift wrapped box with a bow on it. PHONE 2 came in brown paper bag but was less expensive and also had slightly better options.

Most of us would choose PHONE 2 right? Wrong! When it comes to mortgages, most of us are focusing too much on the beautiful gift box and not paying enough attention to the contents. They say around 47% of all mortgages go through a BANK and 39% go through a Mortgage Broker. Broker share is up, but not enough in my opinion.

When it comes to mortgages, the BIG SIX BANKS have been charging higher rates than what can be had from MORTGAGE BROKERS (see Bank of Canada study ‘competition in the Canadian mortgage market). And their inflated prepayment penalty calculations are now infamous (typical BIG SIX BANK penalties are around 4 times higher than other lenders).
Continue reading “But it came in a beautiful box?!”

Posted April 4, 20142 Comments Case study

Is your banker giving you their best rate?

EVEN THE BANK OF CANADA SAYS MORTGAGE BROKERS WILL GET YOU A LOWER RATE.

The Bank of Canada did a study a few years ago called Competition in the Canadian Mortgage Market. The study concluded that consumers get a lower interest rate through brokers. They also said that higher income earners were actually paying higher rates because they are less likely to spend the time to shop around for lower rates.

Last week, I did an interview for the news media about what a broker does. They also interviewed one of my clients. This client owns more than one property, he’s an experienced real estate investor and a senior manager for a major corporation. He uses my service because I save him time and money. He trusts my advice. It’s that simple. Here’s a link to the article.

IS YOUR BANKER GIVING THE BEST RATE?

A simple question. How many of us can truly answer, yes? You walk into your branch, you see a posted rate. Then your banker shows you the “special rate” or “discounted rate”. And then maybe they tell you they can do a little better. But how much better? And why aren’t they giving this up front? Don’t loyal customers deserve the best? Does this game sound familiar?

Continue reading “Is your banker giving you their best rate?”

Posted March 26, 2014 Interest rates

2.99% is back… does that mean we should take it?

5 year fixed @ 2.99% is back. This is NOT a NO FRILLS product (for those of you that saw a similar rate elsewhere earlier this year) but there is tougher qualifying. This seems to have become an annual event. For the past 3 years, we’ve seen 2.99% or less, being offered each Spring. So, why haven’t rates gone up like the Bank’s economists, government analysts and other so-called ‘experts’ had predicted?

There are several reasons but, to sum it all up, the global economies haven’t recovered from the 2008 recession. The US recovery is slower than expected. Canada’s inflation rate is below target levels. There were even concerns we could see deflation, which would cause the Bank of Canada to lower rates… those concerns have gone away…. for now!

WHAT’S THE FORECAST NOW?

Continue reading “2.99% is back… does that mean we should take it?”

Posted February 3, 2014 Case study

Lower rate = Lower payment and a Lower balance in 5 years!

We all know that a lower interest means a lower monthly payment. But did you know that a lower interest rate means you will also owe less when your mortgage comes up for renewal? This has been overlooked by consumers and experts alike. I haven’t seen any articles covering this. And it should change how you choose your next mortgage product.

It all has to do with the effects of compounding interest. Let’s take a look at 2 borrowers, each with a $400k mortgage. Borrower 1 is Mary. Borrower 2 is Dave. Mary has today’s 5 yr fixed rate of 3.29%. Dave has the more normal rate of 5.50% (the rate most experts think we will see in the next 3 to 5 yrs). We’ll amortize both mortgage over a 25 yr term.

Dave’s mortgage has monthly payments of $2441 and a balance owing of $356,749 at the end of 5 years. Mary’s mortgage has monthly payments of $1953 and a balance owing of $343,728 at the end of the first 5 years. Notice the difference in the balance owing after 5 years. We are talking about a $13,021 difference. That’s the effects of compounding interest. Continue reading “Lower rate = Lower payment and a Lower balance in 5 years!”

Posted January 27, 20142 Comments Mortgage News

Bank of Canada says no rate hikes, but possible rate drops!!

Last week, the Bank of Canada governor, Stephen Poloz, held the first of 8 scheduled meetings to set the Target Rate. This is the rate used to set the Bank Prime rate which currently sits at 3.00%. No surprise, no change in the rate. It has been the same since Sept 2010.

From 2011 to 2013, the previous Bank of Canada governor, Mark Carney, continually announced of a pending rate increase. But late last year, Poloz changed the tide when he announced it could be a few years before rates go up. One of the key drivers for rate hikes is inflation. The BoC target for inflation is between 1% and 3%. If inflation goes above 3%, we can expect rate hikes.

Inflation is not a concern. In fact, there are concerns about deflation as the current inflation rate sit at 1.2%. Some experts believe we could see the BoC rate drop. Great news for anyone in a Variable rate. We are also seeing the govt of Cda bond yields drop. Friday’s close was down to 1.59% for 5 yr bonds. Haven’t seen that level since June 2013. This means Fixed mortgage rates will probably go down further. Continue reading “Bank of Canada says no rate hikes, but possible rate drops!!”