News, Views and Trends!
I truly love what I do, so being recognized as a top performer is just icing on the cake for me!
I’m honoured to be named among the Top 3 Mortgage Brokers in Burlington by Three Best Rated®, which identifies a city’s top three local businesses, professionals, restaurants and health care providers.
Continue reading “Honoured to be rated among Top 3 Best Mortgage Brokers in Burlington!”
A couple in their 30s contacts me for a mortgage. They want to buy a new home. She’s a high school teacher and he’s a computer firm manager. Incomes are good. I check their credit.
Let’s stop here for a minute… If they have good credit, an approval is simple and we can provide the clients with several mortgage options.
But let’s assume that this couple ran into some debt and credit issues three years ago… and they made three different choices about how to resolve those credit problems: 1) Credit Counselling; 2) Consumer Proposal; or 3) Bankruptcy. I want to take you through each scenario and show you how long each of these three options affects your ability to finance a home. I bet the results will surprise you! Continue reading “Credit counselling, Consumer proposal or Bankruptcy… Which option is most favourable?”
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?”
CBC News did a report about Renting vs. Buying, earlier this week.. And it featured Kevin O’Leary and Amanda Lang, two well-known TV personalities….Ok, we covered Rent vs. Own in great detail just a few months ago… And I also talked about using your home as a retirement fund, earlier this week in my Baby Boomer 10 year retirement plan article.. But this isn’t what I want to talk about… I want to talk about some comments O’Leary made about Fixed Rates, during that report.
UNPOPULAR COMMENTS AGAINST O’LEARY
I’m taking a chance by speaking out against Kevin O’Leary. But I must speak up regarding something as important as this… So here it goes…
O’Leary is starting a new mortgage company….Congrats! I’m sure he’ll do well. He said his company would ONLY offer Fixed rate mortgages because Mr. O’Leary doesn’t believe ANYONE should be in a Variable Rate mortgage…. he went on to say that because Fixed Rates are so low, you would have to be insane to stay in a Variable Rate…Hmm.. well, if you are one of my clients then you know how absurd this statement is…
2008-09 MORTGAGE HISTORY LESSONS
Over 80% of my clients are, or have been in a Variable rate mortgage… Most of them enjoyed rates of Prime less 0.75% or better… some even had Prime less 0.90%..and for a while, they enjoyed rates as low at 1.35%!!! During the 2008-09 recession, we were inundated with TV and Media personalities telling us to lock into a 5 year Fixed rate mortgage because of the sub-prime mortgage crisis and stock market crash… You remember that? I do… and I recommended clients do the opposite.. take short-term mortgages until the dust settled on interest rates… This WAS NOT the popular advice… It was panic time…. but that’s when you need to remain calm and review the facts…
Fortunately, most of my clients didn’t listen to the media and followed my advice. I recommended several different products… 6 months, 1 year, 2 year, 3 year and even the short-lived 3 yr Variable rate… In ALL cases, it was the right product choice…. It was the best option at the time for that particular client…My clients have saved $$thousands each and every year through my advice!
(historical fact… Variable rate mortgages have been a cheaper way to finance your home in over 88% of time…Professor Milevsky study.)
TODAY’S STRATEGY
Unfortunately, new Variable rate products aren’t priced as well today…. This is probably that other 12% of the time….And although I am not recommending Variable rates today for most borrowers, it still might be the right product for some… To say everyone should get out of their Variable rate is just bad advice! The GOAL IS TO PAY THE LEAST AMOUNT OF MONEY TO OWN OUR HOMES!
My criteria for choosing Fixed over Variable depends on many factors but here are 3 things I pay close attention to:
1-Variable rate pricing not as attractive.. the best Variable rate today is Prime less 0.35% (3.00% less 0.35% = 2.65%)…..
2-Fixed rates are at historical lows (just over 3.00%).
3-the spread between 5 yr Fixed and Variable should be over 1.00%…today it’s less than 0.50%.
Add all of this up and it’s an easy choice today….I cannot recommend Variable Rate for most NEW mortgages….
THIS DOESN’T MEAN YOU SHOULD GET OUT OF YOUR VARIABLE RATE!!!
If you have a Variable rate of Prime less 0.75%, I would stick with that… that’s 2.25%… why start paying over 3.00%? There is no forecast for immediate rate increases… And this is where I am very concerned…. We have a very well known TV personality that comes out and says everyone should lock into a Fixed Rate mortgage…. I’m sure the BANKS would love to see you out of a 2.25% mortgage and into a 3.00%+ rate. I completely disagree with O’Leary. There is no ‘One size fits all’ mortgage. Everyone is different and has different needs… I’d be very careful about listening to anyone that wants to pigeon-hole all Canadians.
BEWARE THE TV EXPERTS… Just a final note…. How many times have you heard ‘Rates are going up soon’ in the last 4 years.? You must lock into a Fixed Rate… I hear it everyday…. and if my clients listened to these ‘Experts’ they would have been out of their Prime less 0.75% Variable rate and into a 4.00%, 5.00% or even 6.00% fixed rate mortgage! Those that have listened to the facts have done extremely well. There isn’t a crystal ball… it’s not magic, it’s simply viewing the mortgage landscape, current economic trends, monitoring inflation rates and paying attention to govt and policy makers… I really don’t watch the news or listen to any media or TV personalities. I just look at the facts and present them here.
As always, if you have any comments or questions or would like to know what strategy is best for you, give your mortgage broker a call.. or call me if you don’t have a broker. I’d be happy to help.
Steve Garganis 416 224 0114 steve@mortgagenow.ca
We can interpret a sentence to mean several different things… Take for example the following comments made by the head of the Office of Superintendent of Financial Institutions (OSFI), Julie Dickson:
– “current levels of interest rates have already made borrowing extremely attractive to all borrowers.” (Wall Street Journal)
– “Extremely low rates will be with us for even longer than envisaged before the summer.” (Globe and Mail)
What does that mean to you? To me, it simply means we are in a historic low interest rate environment.. with an economy that is better off than the rest of the world… add it all up and it looks like a pretty good time to borrow, if you ask me… Borrowing for a house is NOT the same as borrowing for a car or a trip… A house is a tangible asset.. it appreciates tax-free. It’s a good investment…
Borrowing to invest
Speaking of borrowing to invest…. rental properties have never looked more attractive… Borrowing to invest is NOT a bad thing and it is NOT what the regulators and economists are concerned about… They are concerned about borrowers that have borrowed to their absolute maximum capacity and cannot afford to miss a day’s work without being in danger of defaulting on a payment…
Take a bow Canadians… we are doing great!
Last time I checked, Canadians were acting as conservative as ever…. paying down their mortgages faster and borrowing at a slower pace… Look at these stats from The Montreal Gazette:
– “In Canada, an average of 63 per cent of a household’s home value is equity, while in the U.S. this figure is just 39 per cent.” (Matthieu Arseneau, National Bank).
– “In Canada, 40 per cent of homeowners have no mortgage debt; in the U.S. it’s 31 per cent.” (Matthieu Arseneau, National Bank).
– “Debt amounts to just 24 per cent of a household’s average net worth in Canada, while it’s 29 per cent in the U.S.” (Matthieu Arseneau, National Bank).
– “Mortgage debt, which was climbing by 10 per cent or more through last year, has throttled back to a six-per-cent pace. Other consumer borrowing hasn’t grown at all over the past year.” (Benjamin Tal, CIBC World Markets).
– “More than 70 per cent of all mortgage-holders are on an accelerated payment schedule, Tal says, adding: “That’s a smart use of low interest rates.” (Benjamin Tal, CIBC World Markets).
Hmmm… the economists tell us we are doing pretty good, judging from those comments….
Final thoughts.
If interest rates were 6%, 7% or 8%, what we would the media be saying? ‘INTEREST RATES AT HIGHEST LEVEL IN 10 YEARS!’ … or something like that… and I bet we would also see this headline… ‘BANKS WARN THAT FURTHER RATE HIKES ARE ON THEIR WAY….BEST TO LOCK INTO A LONG TERM FIXED RATE NOW’…..
Use your own judgement… seek out professional, non-biased (non-bank) advice…. Hey, I don’t know about you, but I’d rather borrow at 2.60% for aVariable rate or 3.39% for a Fixed rate, than 6%, 7%, or 8%….. We are experiencing historical low interest rates… they will be here a little longer but they won’t last forever.. enjoy them now… take advantage…
CanadaMortgageNews.ca 