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When Second Mortgages Make Sense

When a Second Mortgage makes good financial sense.

When Second Mortgages Make Sense

Quick, what’s the first thing that comes to mind when you think of “second mortgages”?   For some, it could be that shady-looking character in a smoke-filled pool hall… guys with gold chains and a baseball bat nearby. Maybe you’re thinking of someone in financial trouble? Or, perhaps it’s just someone who doesn’t want to pay outrageous costs and penalties to refinance their existing mortgage.

The mere mention of second mortgages conjures up all sorts of images. Most of them, negative. For many, a second mortgage can be a last-resort solution during a financial crisis. For several others, it can be an opportunity to save money. That’s right, to save money.

Sure, second mortgages carry a higher interest rate than first mortgages, but they can also serve a purpose. One of those purposes can be to save you money. Yup, I said it again. There are some new trends emerging with today’s new mortgage products that are forcing consumers to seek other options. Two of these trends are INFLATED PREPAYMENT PENALTIES and NO FRILLS MORTGAGES! Continue reading “When a Second Mortgage makes good financial sense.”

A beautiful gift wrapped box - When it comes to mortgages are you looking at the packaging or what is actually inside.

Are you looking at the beautiful box or what’s inside?

A beautiful gift wrapped box -

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

Most of us would choose PHONE two 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, historically 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 “Are you looking at the beautiful box or what’s inside?”

Mortgage growth has slowed… so why are BANKS winning & CONSUMERS losing?

Blog Image, Feb 12, 2018

I reviewed some recent stats that explain how overall mortgage growth has fallen to its lowest level in the past 17 years!

Overall, mortgages outstanding across Canada total more than $1.5 trillion. And, while this total continues to increase year over year, the rate of growth has decreased. We should pay attention to this!

Typically, when we experience lower mortgage growth or no growth at all, house prices will follow suit and come down.

But, why aren’t the banks up in arms over this given that they make huge profits by lending money? (More on this below.)

Continue reading “Mortgage growth has slowed… so why are BANKS winning & CONSUMERS losing?”

Looser Mortgage Standards Hit the UK! Is Canada Next?!

Home Finances

There’s nothing surprising about the loosening of mortgage standards to spur growth. In the last real housing bubble of 1990, banks and government brought in stricter lending rules, making it tougher for borrowers to get a mortgage.

Fast forward to the present. We’ve yet to see a housing bubble or market crash, but the government has taken drastic – perhaps even unheard of – precautions to slow the housing market.

In 1990, I was working for the largest trust company in Canada. I can tell you that it has never been harder to qualify for a mortgage than it is today!

Continue reading “Looser Mortgage Standards Hit the UK! Is Canada Next?!”

Record-Low Variable Rate Wars EXPIRE THURSDAY… Don’t miss out!

Don't Miss Deadline

The incredible variable rate wars we’re seeing this month are about to come to a close! It would be a shame to miss out on these savings! And, while there is a possibility that they’ll extend into June, I wouldn’t risk it – deep savings like these don’t come around every day! In fact, I’ve never seen advertised variable rates this low!

If your mortgage is coming up for renewal soon – or, even if it’s not – it’s worth a call to your mortgage broker to discuss the possible savings. The math speaks for itself…

Continue reading “Record-Low Variable Rate Wars EXPIRE THURSDAY… Don’t miss out!”

And the Variable Rate price wars begin… Here’s how you can benefit!

Variable Discounts Image, May 2018In order to fully understand how to take advantage of record-low variable rates, it’s important to learn some mortgage history.

BMO came out swinging first a week ago with a variable rate of Prime minus 1.00%. Historically, when a BIG SIX BANK comes out with a huge price decrease, it’s only for a very short time – likely 2-3 weeks. But, during that time, they can gain massive volumes and satisfy their market share requirements from the average borrower.

With all the talk of interest rates going up, this is welcome news for borrowers. Last week, I wrote about Variable rates at Prime minus 1.09%. This week, the banks have caught on.

Continue reading “And the Variable Rate price wars begin… Here’s how you can benefit!”

TD & RBC raised the POSTED rate… but not their REAL rates

Rate Image, May 2018

Much has been written about last week’s Posted rate hikes by TD and RBC. Don’t panic! This is just their posted rate – it’s not the actual rate they give to clients.

I do, however, think we’ll see a minimal rate hike in the coming weeks due to five-year Government of Canada bond yields increasing slightly. Fixed rates are priced closely to bond yields.

Continue reading “TD & RBC raised the POSTED rate… but not their REAL rates”

BIG SIX BANKS exposed and called out by Financial Consumer Agency of Canada!

big-six-banks1

The BIG SIX BANKS have been caught. For those who still think the banker is your friend and is only looking out for your best interests, guess again. They’re in the business of selling and making money. The FCAC has finally reported what Financial Experts have known for years!

This report was recently released… but I wonder how soon it will be forgotten? And how much media attention will this important story really get?

Don’t forget, the BIG SIX BANKS are among the Top 10 Largest and most profitable corporations in Canada. They spend billions in marketing each year. That sort of advertising budget can make us forget about these types of announcements.

Continue reading “BIG SIX BANKS exposed and called out by Financial Consumer Agency of Canada!”

Considering a Second Mortgage? It can save you money!

Home Finances

Quick, what’s the first thing that comes to mind when you think of “second mortgages”?   For some it could be that shady-looking character in a smoke-filled pool hall… guys with gold chains and a baseball bat nearby. Maybe you’re thinking of someone in financial trouble? Or, perhaps it’s just someone who doesn’t want to pay outrageous costs and penalties to refinance their existing mortgage.

The mere mention of second mortgages conjures up all sort of images. Most of them, negative. For many, a second mortgage can be a last-resort solution during a financial crisis. For several others, it can be an opportunity to save money. That’s right, to save money.

Sure, second mortgages carry a higher interest rate than first mortgages, but they can also serve a purpose. One of those purposes can be to save you money. Yup, I said it again. There are some new trends emerging with today’s new mortgage products that are forcing consumers to seek other options. Two of these trends are INFLATED PREPAYMENT PENALTIES and NO FRILLS MORTGAGES! Continue reading “Considering a Second Mortgage? It can save you money!”

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

Continue reading “Banks pass on rate hikes but not the savings.. Shame on the BANKS!”

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

Mortgage penalty calculations.. More important than the interest rate.

greedy banker

WHY ISN’T ANYONE TALKING ABOUT THIS?

You bought a home…  you need a mortgage.. what’s the first question you ask your Banker?  “what’s your best interest rate?”.  And the second question is usually, “what product should I choose?”.

Almost no one asks about Mortgage Penalties or how they are calculated.  After all, how often does anyone have to pay a penalty, right?   WRONG!   $10,000, $20,000, $30,000 and higher.  This is how much penalties can add up to… these are real numbers.   And guess what?  This isn’t some unknown bank or small lender.. These are coming from the BIG SIX BANKS.!!

Here’s a little known stat…. “Canadians change their mortgage every 3 years, on average”.  Ask anyone that’s owned a home before.  Chances are, they’ve had to deal with a mortgage penalty at some point..  and for most of them, it’s an embarrassing subject.   After all, who wants to admit to being the victim?  Check out the stats… Continue reading “Mortgage penalty calculations.. More important than the interest rate.”

Variable rate is out, Fixed rates are in…. But, which term…?

Variable rate mortgageFor more than a decade, I’ve been recommending Variable rate mortgages, as the product of choice. My clients have saved $thousands.  It’s been a great 11 year run..   But now, the strategy has changed slightly.   Read on, to see my newest recommendations..

QUICK VARIABLE RATE HISTORY.

First, you need to understand the history..  Variable rate had lots of pluses.   It had a lower rate of interest, the penalty can never go over 3 months interest, and you have the option to lock into a Fixed rate at any time.

Being in a Variable meant paying lower rates.  In fact, the difference, compared with Fixed rates, ranged between 1.00% and 3.00%.  This translated to several $$thousand in less interest each year. Continue reading “Variable rate is out, Fixed rates are in…. But, which term…?”

BIG SIX BANKS aren’t passing along the Bank of Canada rate cut to consumers?

banksters monopolyToday, the actual BANK PRIME rate should be 2.50%, not 2.70%.   What am I talking about?… follow me on this and let’s see if this makes sense.

It’s been a few weeks since the Bank of Canada cut the rate.  I’ve been waiting to see how this would play out… First, let’s get the terminology clear.    Bank of Canada overnight rate, or Key rate as it’s referred to, directly affects the Retail Bank Prime rate and Variable rate mortgages.   This does not have a direct impact on fixed rate mortgages.

Last January, the Bank of Canada Governor, Stephen Poloz, surprised most economists and financial experts when he cut the rate by 0.25% (well, not all experts, I called for a rate cut just a week earlier).
Continue reading “BIG SIX BANKS aren’t passing along the Bank of Canada rate cut to consumers?”

RBC announces ’employee pricing for mortgages’.. and it’s April Fools day.

RBC-BankRBC is coming out with their employee pricing program for mortgages… yet again.   And like last year’s promotion, it deserves a closer look.. or at least some exposure.

Last year, the program promised to “break through the clutter of price wars within the mortgage marketplace”, to quote Sean Amato-Gauci, Senior VP at RBC.    It was a twist on the auto industry.

And like last year, they aren’t putting their actual interest rate isn’t going to be advertised in any print.  They are hoping Consumers will be intrigued enough to call or walk into a branch to get the actual rate.   Well, I’ll save you the suspense.  Rumors say it could be as low as 2.69% for a 5 yr fixed rate product.  Hey, that’s a good rate.  It’s a competitive rate.  But it’s not the best mortgage out there!   Check out these facts… Continue reading “RBC announces ’employee pricing for mortgages’.. and it’s April Fools day.”

Will Variable rates increase as Bank Prime drops?

where to invest  Here’s a warning to all….   Watch out for the BANKS to increase their Variable rate mortgage pricing.  History tells us that when the Bank of Canada lowers their Target Rate, and the Bank Prime falls, Variable rate mortgage pricing increases.

If you have a mortgage coming due in the next 4 months, speak with a mortgage broker to get you a rate hold immediately!

Today, you can get Prime less 0.65% on a Variable rate mortgage.  That’s 2.85% – 0.60% = 2.20%. THIS PRICE COULD DISAPPEAR!  2.20% is a great rate!   No one would argue that.  The BANKS are counting on you to be content with that 2.20% rate. On March 4th, the Bank of Canada meets again to set the Target Rate.  And all indications point to another 0.25% reduction.   Continue reading “Will Variable rates increase as Bank Prime drops?”

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