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Get a secured line of credit while you can qualify.

My advice is simple: Over 50? Get a secured line of credit while you can qualify.

Get a secured line of credit while you can qualify.

Contrary to media reports about our ‘record personal debt levels’, it’s extremely prudent to ensure you have access to emergency money.

The line of credit popularity that took place in the ’90s wasn’t a bad thing. It allowed us to borrow at low rates to invest or spend as needed. Many successful investors have been doing this for decades. Borrowing to invest makes smart financial success. Don’t let anyone tell you differently.

We’re seeing more reasons for Canadians to get a secured line of credit now: Age; Income; and Qualification.

Continue reading “My advice is simple: Over 50? Get a secured line of credit while you can qualify.”

50+ with little or no Mortgage? You Need a Line of Credit!

Blog Image, Line of Credit, May 2019

Contrary to media reports about our ‘record personal debt levels’, it’s extremely prudent to ensure you have access to emergency money.

The line of credit popularity that took place in the ’90s wasn’t a bad thing. It allowed us to borrow at low rates to invest or spend as needed. Many successful investors have been doing this for decades. Borrowing to invest makes smart financial success. Don’t let anyone tell you differently.

We’re seeing more reasons for Canadians to get a secured line of credit now: Age; Income; and Qualification.

Continue reading “50+ with little or no Mortgage? You Need a Line of Credit!”

Reverse Mortgages growing in popularity… Product of the year 2018?

Reverse mortgage

Mortgage stress test is the buzz phrase in mortgage lending for 2018. Every borrower, regardless of how much down payment you’re making, must pass a stress test to qualify for a mortgage. The math is simple, yet intimidating. Lenders must now use your mortgage contract rate PLUS 2.00% to qualify you.

Yes, that’s correct. You need to qualify at a rate that’s 2.00% higher than your actual rate. And it doesn’t matter if you have 35%, 40%, 50%, 60% or even 70% down payment. That will not have any impact on your approval. It’s all about how much income you can prove you earn and the strength of your credit worthiness.

For many, this new rule will prevent them from qualifying for a mortgage. And for seniors or people approaching retirement who still require a small mortgage to get through the next 10 or 20 years, these new mortgage rules are a killer. The stress test is surely causing stress among many Canadians!

I’M RETIRING AND WANT TO STAY IN MY HOME…

A reverse mortgage is a terrific option for homeowners who are at least 55 years old. It empowers them to be able to stay in their home and access tax-free equity without having to make regular payments.

Continue reading “Reverse Mortgages growing in popularity… Product of the year 2018?”

New 2nd mortgage options at 3.50% with no legal fee or appraisal fee!

canadian-money-gift

I’m reposting this article due to the tremendous response and numerous inquiries..  

We recently came across a lender that is offering an unheard of offer.   Secured lines of credit in 2nd position at Prime plus 0.50%.  That’s 3.50% today!   We haven’t seen this sort of offer in quite a while for 2nd mortgages.  Here’s the qualifying details:

  • you have to have good credit
  • you need provable income to qualify along
  • there must be adequate equity in your home.   The product allows you to borrow up to 80% of the appraised value of your home.
  • the appraisal fee and legal fees are covered by the lender (that’s a $1200 savings)!!
  • a small broker fee may apply …. see me for details.

This rate is truly incredible for such a product.  But having the legal fees and appraisal covered is truly amazing! I rarely get this excited about a product but this one has me pumped!   For those that don’t know, most 2nd mortgage options begin at 10% to 12% plus fees.

For those that can’t provide traditional income confirmation, such as self-employed or commissioned employees, there are other options for you.  The rates are higher but there are options.  And for those with slow or poor credit, you also have some options available for mortgage funds.. provided there is adequate equity in your home.   Remember, each situation is reviewed on a case by case basis.  Pricing and cost will vary.

If you are looking for some extra funds or access to a line of credit, this product could be a great option.

Happy Holidays!

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

NO SET UP COSTS!! Secured line of credit at Prime plus 0.50%!

canadian-money-giftA few months ago, I announced a special promotion.  A secured line of credit, at Prime plus 0.50% (2.85% plus 0.50% = 3.35%) with NO set up costs.  The response has been so overwhelming that I’m publishing this promotion once again.

FREE legal fees and FREE appraisal fees.  The Bank is covering both these costs.   You pay nothing.  $0.00.  It’s just that simple.  AND, this Bank will go in 2nd position behind your existing 1st mortgage if necessary.

You must qualify, of course.  Good credit, stable income, qualify real estate, etc.   If you are interested in this product, contact me for details.   This is a limited time offer.  We do not have an expiry date but it can be terminated at any time.

Brokers and Agents, please do not call.  I am not able to share this offer with you.  Sorry.

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

HELOC’s capped at 65% but some exceptions still apply..

Earlier this month marked the beginning of the end of 80% loan to value HELOCs.   Several Banks and of the Financial Institutions began to cut back the maximum LTV from 80% to 65% as per OSFI’s regulations.   But there are a few loopholes in the new rules….

  • The good news is that existing HELOC clients don’t have to worry.. these changes don’t apply to them.  OSFI is allowing them to keep their HELOCs at 80%….
  • Only OSFI regulated Financial Institutions are affected… Provincially regulated FI’s aren’t affected… Credit Unions don’t fall under OSFI’s rule…  there are still some Credit Unions offering HELOCs to 75% and even 80% loan to value.
  • Some of the Banks are still offering a combination of a HELOC and a mortgage of up to 80% ltv as long at you have at least 15% of your balance in an amortized payment schedule, and not interest only payments.

There is more good news… The BIG SIX BANKS can’t offer you an 80% LTV HELOC but the credit unions can… Maybe Canadians will start to seek other Lenders……They may finally discover that there much better options out there.   Watch for the Credit Unions to take a chunk out of the BIG SIX BANK mortgage pie.

Not sure where you fit in?   Call me for details.

Steve Garganis

416 224 0114

Part 2 of OSFI’s new mortgage underwriting rules announced

Hot topics this week are all the govt changes to mortgage lending…  but before we get into the bad news, I thought I’d start with some positive news…  Interest rates are still at all time lows….  if you have a mortgage or will be getting one soon, today’s rates are lower than ever before…  That means more money in your pocket!   We don’t seem to hear enough about that…

Okay, now for the update…Remember, these changes will affect ALL Federally regulated financial institutions….BUT they won’t affect MOST CREDIT UNIONS and other Lenders..

Yesterday we got a double whammy…  First the Federal Department of Finance announced changes to CMHC insured mortgages.… And later that day, OSFI announced Part 2 of their changes to Residential Mortgage Underwriting Practices and Procedures, better known as RMUP… but I prefer RUMP because that’s exactly where most of us will be feeling the effects of these changes…

The timing of all this tightening puzzles most of us in the mortgage industry.   Canada has been the envy of the world when it comes to our mortgage underwriting practices… The govt seems to be getting more into credit underwriting and procedures than ever before… And yet they have not given us any true data or reason for these changes….

Nevertheless, it’s important to keep up to date as these changes will affect us all.  Part 1 of changes were announced earlier this month through a Draft update on June 6th..   And here are the details of the final changes which come into effect later this year… there is a lot of text in the final draft but we are only focusing on the changes that will have the greatest impact on us:

  • Credit checks should be done more often.. minimum credit scores should not solely relied up to determine a borrower’s credit worthiness.
  • Home Equity Lines of Credit will be limited to 65% loan to value, down from the current 80% loan to value. (still not sure if there will be any grandfathering of existing lines but my guess is no)
  • there is more wording with regards to Lender’s Senior Management having more minimum reporting… (this looked like make-work stuff to me as most Lenders have tons of reporting).
  • Cash-back mortgages are gone (no big deal here…. very few of these products were ever used by us ‘irresponsible Canadians’… )
  • Self-employed individuals will be required to provide and pass an ‘income reasonability’ test… (these already exist with most Lenders)
  • Lenders should use the 5 yr fixed contract rate or the Bank Posted rate when qualifying for Variable rate products…even conventional mortgages… (again, nothing new here.. most Lenders are doing this already….yawn)

Who can blame you if you if you’re having trouble keeping up with all these changes to mortgage rules and lending policies.  We must question the purpose of these changes… little to no proof has been presented with regards to why the govt feels these changes are needed… and the timing may come back to bite them in the RUMP!   Some experts are making the argument that the govt’s attempt to avert a major housing downturn, could actually be the cause of it…..let’s hope not.. only time will tell.

I question why the govt is so focused on the estimated $1trillion residential mortgage market, when we have little or no rules when it comes to the other $500billion of non-real estate debt such as credit cards, loans and lines of credit.   Why is it okay to buy a car with $0 money down or okay to make NO payments for 6 months or 1 year, with interest rates of 8%, 18% and 28%, but if you want to buy or refinance your home, you better be prepared to jump through several hoops?   Can you say, ‘I need to refocus my energy and efforts’?

THE GOOD NEWS

Mortgage Brokers will be much busier with these new changes.   Your traditional Bank and ‘A’ Lender WILL NOT be able to provide the same financing as before…. BUT there are several other Lenders that are ready to fill the gap… including Credit Unions and other non-bank Lenders…..   We could see the small Lenders grow with these changes…  As always, feel free to contact me if you have any questions or need clarification.

Steve Garganis

OSFI announcement: HELOCs cut to 65%, partial re-qualifying for mortgages at renewal time..

The Office of The Superintendent of Financial Institutions (OSFI) announced some interim changes that will affect all mortgage borrowers and also those with Home Equity Lines of Credit (HELOC).    Draft Bill B-20 was introduced March 19, 2012… and somehow, in less than 3 months, the govt has been able to review the short and long term effects of the biggest changes ever put forward before this country.  Did they work efficiently or did they rush through this?

In the end, we saw 2 major changes announced that will affect all mortgage borrowers….  changes that I feel are completely uncalled for… To be blunt, I haven’t been able to find one piece of data or fact from OSFI or the govt to substantiate their call for change….  Let’s take a look at their changes…by the way, you can click here for the full version from OSFI’s website

1- Re-qualification at Renewal “Current practice regarding residential mortgage renewals has served (Federally-regulated Financial Institutions) FRFIs well.” … “FRFIs, however, will be expected to refresh the borrowers’ credit metrics periodically (not necessarily at renewal) so that FRFIs can effectively evaluate their credit risk.”   as per OSFI text.

Some good news here… I’m glad OSFI isn’t making us fully re-qualify for a mortgage at every renewal period… but obtaining a new credit report at the Lenders discretion should concern you…  If you think it’s all about making your payments on time, guess again… Your overall credit balances, your credit availability, you balances in proportion to your available credit, how recent you obtained credit….. All these things are factored in a mortgage approval decision…. and let’s not forget your credit score… If your credit score goes down or if the Lender changes their policy (we’ve seen that happen many times over the past 4 years), then you could be in jeopardy of not qualifying for a renewal…

Life is never perfect…. we all hit some speed bumps…. the character of a person isn’t measured when times are tough, but rather how they handled that rough patch in their life… If you default on your mortgage, there are existing remedies in place for the Lender to collect their funds…..Do we really need to arm Lenders with a weapon that allows them to cancel or call your mortgage if they think you MIGHT not be able to make future payments??    Are we guilty until proven innocent?  Thumbs down from me on this one…

2- Home Equity Lines of Credit (HELOCs) “…the HELOC component of a mortgage be restricted to a maximum loan-to-value ratio of 65 per cent.  HELOCs are inherently riskier products, given their revolving nature, persistence of debt balances and their ineligibility for mortgage insurance.  However, HELOCs at or below an LTV ratio of 65 per cent will not be required to be amortized….”  as per OSFI text.

We aren’t sure what this means… if you have a HELOC greater than 65% loan to value, will you need to amortized part of it?   The wording in OSFI’s announcement shows me just how out of touch with reality they are….  HELOCs are riskier but they are already much harder to qualify for.  Reality is that arrears or defaults are near all time lows….  Reality is that most HELOC borrowers use them for a large number of things… investments, home renos, business, etc….   The govt has not given us any data to back up their statements about higher risk… and industry stats show we are fine…  It was only a few years ago when CMHC was offering insured HELOCs up to 90% loan to value…?   We’ve gone from 90% to 65%…. Has the pendulum swung too far…?

These changes will come into effect soon…we’ll have to watch for the Final announcement on how they will be implemented…  And because the govt is putting the responsiblity back on the Lenders, we will see different interpretations of these new rules…No two Lenders are alike.

So what’s next, we can’t buy investment properties?   Oh yeah, CMHC stopped insuring rental properties last year…. almost forgot… BIG thumbs down from me on this move.

If you have a mortgage coming up for renewal or have a HELOC and aren’t sure how these changes will affect you, feel free to give me a contact me….

Steve

CMHC under OSFI control…. another kick in the rear to Canadians.

CMHC’s MOVE TO OSFI CONTROL WILL BE A KICK IN THE BUTT TO ALL CANADIAN HOMEOWNERS.

Is this what CMHC staff and Canadian homeowners are thinking?….   That’s right, it could be OSFI head, Julie Dickson on one end, and that’s you and I on the receiving end!

You’ve seen the headlines lately….  “OSFI proposes radical changes under Draft Bill B-20” which was up for discussion until May 1st.    But weeks earlier, Julie Dickson, the head of OSFI made a surprise remark at speech in Toronto’s Board of Trade…(some were calling it an ‘oops’, or a ‘slip-up’ ) where she stated that the proposed HELOC changes were a done deal…  this was on April 7th… well before the May 1st discussion deadline…

And more recently, we saw more questionable remarks from OSFI…. this time from Vlasios Melassanakis, Manager of Policy Development.   “Are the banks equipped to handle a 40% drop (what occurred in Toronto market in early 1990’s)? Need to stress test to find out.”    Is Melassanakis for real?   40% drop??  where is he getting that number from??    Absurd..! and unsubstantiated!   That’s my response.

What’s going on here, you might ask??

Mortgage arrears are low, affordability is high, property values have declined or remained flat across the country except a few pockets including GTA…   So why all these drastic changes?

I was contacted for my opinion by some business writers from our national media.   We were trying to read the fine print… to understand what it all this meant…. and why it had to be done so quickly…  Why do we have move CMHC, a Crown corporation that’s been around for over 50 yrs and making $billion profits for Canada…why do we need to move them under OSFI control?

The dust hasn’t settled yet, but here are some of the changes and my thoughts on what seems to be happening.

  • introduce a limit on secured lines of credit to 65% of the value of your home… down from 80%… this move makes no sense…  this will limit your ability to draw on the equity in your home to invest, access cheap money to run a business (the self-employed are an understated segment of the population that will really suffer), pay for your kids education, or just access funds for personal use…   the govt wants to mandate this product for the first time in history…  and by the way, it’s always been harder to qualify for these products than a regular mortgage.
  • re-underwrite your mortgage at renewal... they propose to reapprove your income, credit, get a new property appraisal at time of renewal… regardless if you made all your payments on time…  where’s the logic?  what’s the point?  Would any lender really tell someone their mortgage won’t be renewed even though they paid fine?  Will they ask you to pay down your mortgage if a new appraisal says your house is worth less?
  • they have even suggested they want to change our long running standard underwriting debt servicing ratios… these have been around for over 30 yrs and have served us well… why the change?
  • OSFI is a regulatory body that provides regulation and supervision to 152 Banks, Trust companies and other Lenders.   They are auditors….  Where is their motive to provide access to mortgage money for prospective homeowner?   This move to push CMHC under OSFI is the biggest change in decades and it’s very risky given that Canada is looked upon as a stable country with a stable banking system…  why would the govt make all these changes?  and why now?
  • let’s not forget some of the comments from Minister of Finance Flaherty.. he suggested CMHC may not even be necessary in the future…  a bold statement.

POSSIBLE EFFECTS OF THESE CHANGES

It’s clear these changes will effect us all….. here are some of the early results of the changes:

  • we have already been informed that CMHC has tightened their lending policies… there was an official communique released last month that stated, more applications will get referred to underwriters for full review….
  • several banks have amended or cut their business for self mortgage programs… end result is higher cost to obtain funding… guess that’s good for who?? not the consumer…
  • less access to the equity in your homes will mean less money towards investments… we have  huge segment of our population that borrows to invest in stocks, properties, etc..  they will have less to access now….  resulting in less money in the economy.
  • we may achieve  a lower personal debt level… but will that help the economy?…
  • less money flowing into the economy can’t be a good thing…  if we wanted to slow things, the Bank of Canada would have raised their Target Rate long ago…. instead, it has remained unchanged since Sept 2010.
  • there will be more..

We’ve heard that a review of CMHC by OSFI will be  completed by June… but the results won’t be published… so we can only guess and speculate as to what changes these auditors at OSFI will be proposing….  We’ll be watching and reporting…..Let’s hope they don’t fix something that isn’t broken.

As always, if there is something you need help with, let me know… I’m happy to help.!


Govt to cut Secured lines of credit to 65% loan to value…

Thursday’s speech by OSFI head, Julie Dickson, at the Toronto Board of Trade, indicates it’s a done deal.  Secured lines of Credit will be capped to a maximum 65% of the value of your home.  “…the guideline does set out some firm rules that all institutions will need to adhere to – specifically that home equity lines of credit – or HELOCS – can have a loan to value ratio no greater than 65%….”

WE’RE MAKING SOME CHANGES…. I MEAN, WE ARE PROPOSING SOME CHANGES…

It was only a few weeks ago that OSFI issued a Draft B-20 guideline, a guideline that is filled with radical changes to mortgage lending rules and policies.    It was supposed to be up for discussion, with a May 1st deadline…. So much for discussion…. it appears the decision was made already according to Ms. Dickson’s speech today…. here’s a copy of that speech… April 5 2012 remarks by Julie Dickson.

90%, 80% AND NOW 65%???… WHEN DOES IT END?

Remember 2007?  It was just a few years ago that CMHC was offering 100% loan to value, interest only payment mortgages.  Back then it was good to borrow at these levels…. And HELOC’s could be had for up to 90% LTV.  Over the past few years, the govt has tightened up mortgage rules in an attempt to reduce access to credit.    Mortgages were amortized for 40 years, then cut back to 35 and now 30 years..  But now the govt believes they need to step in again and limit access to your equity by reducing the Loan to Value limit to just 65%….   I looked back to some historical lending policies and couldn’t find a time when the govt ever imposed a limit of just 65%.   It is unheard of! And it’s going to have a big effect.

SO WHAT’S THE PROBLEM?

OSFI is finding a solution to a problem that doesn’t exist.   I don’t think they realize that Banks have pushed borrowers into lines of credit for years now, as a way of providing easier access to the equity in their homes.    Canadians aren’t buying new TVs or new cars or other luxury items… they are using the equity to improve their net worth by buying investments.   Why is this a bad thing?   Are our defaults up?  NO!  Then what is the problem….?

WHO WILL THIS AFFECT AND HOW?

If you are a self-employed person and ever tried to get a business loan from the Bank, then you know how difficult it can be to get an approval… but even if you do, the repayment terms and interest costs could be a hard stop.   End result is that business idea could remain just that… an idea that never got launched.   One of the more popular alternatives was to access cheap money by borrowing, against the equity in your home.  Mortgages can be great but if you need to borrow, repay and borrow again, then a mortgage can have costly registration fees and penalties.  But through a HELOC,  the repayment terms are great and it’s also a much lower rate of interest than any business credit facility.

Borrowing to invest isn’t anything new.  A HELOC allows you to access YOUR equity at preferred rates.   How about buying a second home or a rental property?  You could use the equity in your home to help with the purchase and HELOCs give a separate accounting which makes reporting to Revcan much easier.

How about borrowing for your child’s education?   Are we going to force Canadians to refinance their mortgages in order access cheap money?   I’m sure the BIG SIX Banks will love to see you break your mortgage and pay their infamous penalties.

END RESULT

Get ready, because you are about to see us pushed into higher interest, unsecured lines of credit (oh yeah, there wasn’t any mention of reviewing these lending policies… that’s because NONE exist!).

Which debt would you pay last…. a mortgage, a secured line of credit or a credit card or unsecured line of credit?    Obviously, it’s the unsecured debts would be last on our list… we will always pay for the roof over our heads…. which is why the defaults are still very low and within very acceptable levels.

We are going to see many Canadians discouraged from investing.. they won’t want to go through the trouble of borrowing with a mortgage…  Congratulations OSFI, you’ve made borrowing more expensive….you’ve made investing for our future tougher than it has to be.

The WINNERS… the BANK…. The LOSERS… you and me, the average Canadian…!

OSFI’s latest proposals will affect every mortgage and line of credit..

Earlier this week we saw a draft guidelines proposed by Brock Kruger from  The Office of the Superintendent of Financial Institutions.  Yes, more tightening of mortgage and secured real estate lending……  To put this in plain language, the proposal will affect almost everyone… it will change how mortgages and secured lines of credit are offered….. in shorty, I think this plan is trying put out a fire that doesn’t exist.  There is no need for the changes.

Draft B-20 just goes too far…..   they target mortgages but also Home Equity Lines of Credit (HELOC).    Most of the media coverage on this has been somewhat neutral.. but finally we have seen one reporter question these proposed changes.  This article by Peter Foster in the National Post was great…   He questions why we need any more changes when our mortgage and banking system is the envy of the world….  There is no emergency, no arrears problem, nothing to indicate our mortgage lending policies are overly generous.

It should be noted that non-bank lenders will not be affected by this… leaving them as a potential winner if these guidelines become policy…

Here’s a link to the entire 18 page draft.

SUMMARY OF THE PROPOSED CHANGES:

Cash back mortgages could disappear.. currently, one could get a mortgage for 95% of the purchase price at Bank posted rates and then get a 5% cashback.  The cashback can be used as the down payment.  ( I don’t see many reasons for applicants to buy with no money down so this isn’t a big issue for me)

-homes would have to be appraised at renewal timethis is just crazy… can you imagine if your property value dropped and the bank asked you to pay down your mortgage at renewal time or even worse, call in your mortgage?  What’ s OSFI trying to do.. force everyone to take a 10 yer fixed rate mortgage?   They have already made Variable Rate mortgages harder to qualify for…. what’s the matter, they don’t want us to pay less interest?  

HELOC’s would have to be amortized meaning NO MORE INTEREST ONLY PAYMENTS...  this one will affect more households and business owners than the OSFI probably realizes… businesses use their homes to finance businesses… that’s been going on for decades… but they aren’t borrowing with no assets.. remember, they are putting up their homes as collateral.. if we start to make it even more difficult for self-employed to obtain financing, this will affect the economy almost immediately.  But how about the 2nd or 3rd time buyer in their 30’s or 40’s that wants to tap into their equity for investments… ?  Are we going to eliminate all interest only payment facilities?  

-HELOC’s maximum would be reduced from 80% to 65% loan to value of your house…. and let’s not forget that just a few years ago we could have obtained up to 90% loan to value through CMHC insured products. Again, just another crazy idea and very radical change in just a few years… where is OSFI taking us?

mortgages would require tighter debt servicing guidelines including fewer exception approvals by your lender…

Mr. Kruger, your intentions may be honorable, but you are not being practical or realistic.   Why have you introduced these proposals?   To reduce access to credit?   To make it more difficult for Canadians to tap into their home equity?   To make it tougher to buy a house?     Whatever you think these changes might do, I can tell you, as a 22 year mortgage industry veteran and industry insider, that these proposed changes will just shrink our economy, force us to take longer fixed rate products resulting in even higher mortgage penalties for the Banks…  It will force us to tap into our credit cards and unsecured, higher interest credit facilities.… It will force business owners to pay more for raising capital… it will discourage investors….

Give this one a rethink… you are searching for a solution to a problem that doesn’t exist.

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