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Time to review your mortgage

How’s my rate?

Time to review your mortgageYou’re two years into your mortgage term. You’ve got a great rate, or so you thought? But now you aren’t sure. With so much talk about record low interest rates, you begin to question. Maybe there’s a better deal out there? Did you choose the right product and lender? Has your mortgage advisor or broker contacted you during those two years? Does this sound familiar?

We’ve all heard of buyer’s remorse. That’s when you make a purchase, only to regret spending the money days or weeks later. I’m seeing a lot of people second-guessing their mortgage decision recently. And I have news for you… RELAX! There is a way to check to and see if you made the right choice, and better still, there is a way to see if you can do better today.

Continue reading “How’s my rate?”

Important week for mortgage rates

Important week for mortgage rates could cost or save you thousands.

Important week for mortgage rates

Mortgage rates fell by about 1% since January of this year. That rate drop has created a surge in real estate sales across Canada, with September and October seeing a greater than average number of real estate transactions.  We also saw consumers taking advantage of these low rates by refinancing their mortgages early.

The Five-Year Government of Canada bond yields have been going up and down like a yo-yo over the last three months, with a low point being 1.13% and a high of 1.58% just this past week. This uncertainty/volatility forced financial institutions to raise their interest rate by about .2% to .3%.  Having said that, interest rates are still very low. In my discussions with the major lenders, they are all telling me that it’s busier than usual for home purchases and refinance purposes. Continue reading “Important week for mortgage rates could cost or save you thousands.”

Why didn't the Bank of Canada Gov cut rates last week

Why didn’t the Bank of Canada Gov cut rates last week?

Why didn't the Bank of Canada Gov cut rates last week

WAS THIS A BIG MISTAKE?

Last week, Stephen Poloz, the Bank of Canada Governor, kept the Prime Rate as is during the 6th of their eight scheduled meetings for 2019.  The Current Target rate is 1.75%.  (Bank Prime rate is derived from this rate.  Today’s Bank Prime rate is 3.95%.  Over 99% of time, when the Target Rate is cut, the Banks will reduce the Bank Prime Rate by an equal amount).

This was a very calculated decision that has politics written all over it.  While the rest of the world banks have been cutting rates to combat a looming recession due to growing global trade wars and slowing global economies, our Government did nothing.  Apparently, the Canadian economy is ‘resilient’.  The next Bank of Canada meeting is set for October 30, 2019.  Oh, and there’s a Federal election on Oct 21, 2019.  Yeah, this has politics written all over it.

WHAT YOU SHOULD KNOW ABOUT MORTGAGE RATES TODAY.  Continue reading “Why didn’t the Bank of Canada Gov cut rates last week?”

Long term contracts have a price… nothing has changed from 2010

Originally posted in 2010…. some things never change..  enjoy and beware.

Here’s a great article written by consumer advocate, Ellen Roseman.  She points to different industries where signing in for the long term protection can be very costly and expensive.

Ever wanted to change cell phone providers?  How about internet providers?  Move your investments or rrsps?  Cancel that hydro or gas contract because you moved?

And how about mortgages?  When interest rates started heading downward about 12 months ago, thousands of borrowers in fixed rate mortgages wanted to get out of their higher rates and start benefitting from the record low interest rates we have been seeing.

But they were shocked to hear of unbelievably high early prepayment penalties… the example Ellen uses is about a $46k penalty on a $530k mortgage with a major bank…  I’ve seen dozens and dozens of situations like this.

Beware of long term mortgages… with the average person moving or refinancing about every 3 years, choosing a 5 year fixed rate term is usually not the best option.  It could cost you more than you think… always seek professional advice from a reputable mortgage broker before selecting your mortgage.

(Just a personal note… It sure would have been nice to see some mortgage relief given to the average homeowner during the recession.   CMHC used to cap their penalties to 3 months interest but removed this cap in 2000…quietly, all financial institutions are free to charge a higher penalty…and they all do.. the longer the term, the greater the penalty…)

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

Tips on how to reduce your mortgage penalty

break your mortgage

Interest rates are still near record low levels. You’ve heard your co-workers,  friends or family brag how lucky they were to renew into these once in a lifetime rates.

But how you do you take advantage?  If you break your fixed rate mortgage then you face an enormous prepayment penalty…we’ve seen reports of $10k, $15k, $20k and even $30k in penalties….Wow!

Well, here’s a few tips…

-first, if you are in a 10 year fixed rate mortgage, and your are at least 5 years into the term, then the maximum penalty is 3 months interest  (this is a little known fact… Section 10 of the Interest Act of Canada).

-One more way to reduce the penalty is to utilize the annual prepayment privilege that’s within the mortgage.  Most mortgages have between 15% and 25% prepayment privileges which equates to a 15% to 25% reduction in the penalty…. Continue reading “Tips on how to reduce your mortgage penalty”

Is there a better mortgage rate out there?

where to invest You’re 2 years into your mortgage term.  You got a great rate… or so you thought…? But now you aren’t sure.   So much talk about record low interest rates…  You begin to question..  Maybe there’s a better deal out there?   Did you choose the right product and Lender?  Has your mortgage advisor or broker contacted you during those two years?  Does this sound familiar?

We’ve all heard of buyer’s remorse….    That’s when you make a purchase, only to regret spending the money days or weeks later.    I’m seeing a lot of people second guessing their mortgage decision recently.   And I have news for you… RELAX! There is a way to check to and see if you made the right choice, and better still, there is a way to see if you can do better today. Continue reading “Is there a better mortgage rate out there?”

More BIG SIX BANK penalty nightmares… when will Canadians learn to look elsewhere for their mortgage?

greedy banker Here’s a great article from The Star’s Ellen Roseman on mortgage penalty nightmares.  She shares just a few stories out of the dozens she’s received over the past little while.   There is no reasonable justification for charging borrowers these inflated penalties…   If you think your immune from these penalties, think again.

Notice the name of the Banks that are mentioned in her article… Yes, part of the BIG SIX club…  Don’t get lulled into believing that dealing with a BIG SIX BANK offers some sort of immunity from higher penalty charges…   The experiences of these borrowers and countless others proves otherwise…

I’ve been getting more calls and comments on this recently… $10,000, $15,000, $20,000 in penalties.  How is it that the smaller Lenders can offer the same or better interest rates, and not charge these inflated penalties?   The BIG SIX BANKS reported a record $30billion combined profit in 2012…!!  Doesn’t make any sense, does it?   And yet, it continues…

Remember, there are several other Lenders that don’t calculate their penalties with the same inflated formula…   Seek advice from a mortgage broker…  get another opinion… There are better options and I have access to them!   It’s no secret…. I’m happy to share this info to anyone that wants it.

Come on Federal govt… do something to stop this madness and protect Canadians from this gouging!

Your best interest is my only interest!

As always, I welcome your comments, calls and questions.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

Mortgage Penalties exposed… an in-depth study, part 2…the update.

greedy banker Two years ago I published, what would become, my most widely read article.   Mortgage Penalties exposed…. an in-depth study reveals unjust penalties was written to show just how unfair penalties had become.   The surprising results showed that the BIG SIX BANKS were the leaders when it came to charging the highest penalties in Canada.   If you had a Fixed rate mortgage and thought your mortgage penalty could only be a 3 month interest charge, you were in for a huge shock.

Consumers were experiencing $10k, $15k, $20k and even $30k in prepayment penalties and more! Ridiculous amounts.   Put another way, these penalties equaled 12, 16, 20 months worth of interest and sometimes more!   But we also discovered some good news..   There are better alternatives to the BIG SIX BANKS.!  There are several other Lenders that don’t use the same inflated and unfair prepayment penalty calculation as the BIG SIX BANKS.   There are other Lenders with competitive, and often better, interest rates, and with much lower penalties.  That original study opened the eyes of Canadian borrowers. (another eye-opening stat…the BIG SIX BANKS reported a record $30billion in combined profits for 2012.)

Two years later, with more consumers being forced into Fixed Rate products, we thought it was time to revisit Mortgage Penalties and see what changes had been made, if any…

Continue reading “Mortgage Penalties exposed… an in-depth study, part 2…the update.”

Fed govt, BIG SIX BANK’s pushed us into Fixed rates!…part 2 of 2.

Flaherty and Harper

IT’S NO COINCIDENCE THAT THE BIG SIX BANKS CONTINUE TO REPORT RECORD PROFITS.

The Bankers were onto something.  Now if they could only keep Variable rate pricing higher or make itMark Carney tougher to get a Variable rate mortgage…. In 2010, the Fed govt would help increase those Bank profits…All new Variable rate mortgage borrowers would need to qualify at the Bank posted 5 year fixed rate.   The Feds said they had to tighten Mortgage Lending Rules… They had to make it tougher to qualify for a mortgage with fluctuating interest rates to ensure we would not have a ‘housing bubble’ and a ‘mortgage default problem’…  This pushed out 5% more borrowers from qualifying for, and benefiting from Variable rates.  And by the way, at that time, Variable rates ranged anywhere from 1.50% to 1.95% compared with the best discounted 5 yr fixed rate of 3.89%…..!  Anyone seeing a pattern here?   (Some stats to remember…Mortgage defaults have been under 0.50% for over 15 years are currently at around 0.33%… this is at or near record lows!!… so where’s the problem??)

This is also when the BIG SIX BANK’S inflated, and unfair mortgage penalty calculation came to light.   The lower rates became, the higher mortgage penalties climbed…  $10,000, $20,000, $30,000 in mortgage prepayment penalty charges were popping up in mortgage blogs and news sites.   Even the media had to jump in and cover some of this…  And when Canadians needed a break in their mortgage payments, they were left out in the cold.   These inflated penalties made it impossible to get out of their higher Fixed rate mortgages without paying an enormous penalty. Continue reading “Fed govt, BIG SIX BANK’s pushed us into Fixed rates!…part 2 of 2.”

Fed govt, BIG SIX BANK’s pushed us into Fixed rates!…part 1 of 2.

Mark CarneyVARIABLE RATE MORTGAGES WERE THE BEST OPTION

For years, I’ve promoted the merits of Variable rate greedy bankermortgages vs Fixed rates.   To me, it was a no-brainer.  Historical stats showed that you would save over 1.00% on your mortgage, per year, every year (some years had savings of over 3.00%!).   Do the math…  That works out to $1,000 to $3,000 per year for every $100,000 of mortgage.

And for years, the BIG SIX BANKS, the Bank of Canada, the Federal govt and other fear-mongers pointed out that Variable rates fluctuated and your rates would change and possibly go up…

If  you were able to block out these warnings, do a little research, then you may have been lucky enough to enjoy the huge savings that Variable rates gave us over the last 15 years…  Fortunately, over 80% of my clients listened to my advice and chose Variable rate.  But even at the height of Variable rate popularity,  just 45% of Canadians were ever in a Variable rate product at any one time. Today, it’s less than 15%.

In 2008, the U.S. sub-prime mortgage crisis hit.   Financial markets were in turmoil.  New Variable rate mortgages were either pulled from the shelf or were priced so high as to make them an unattractive option (prime plus 1.00% with some Banks).

BEGINNING OF THE BANKS HIGHER PROFITS

The Banks actually liked this.   After all, the most profitable mortgage product is the 5 year Fixed rate.  Not hard to figure out.   The lower the interest rate, the less the Bank’s make.   This became a great opportunity for the Banks to reduce their Variable rate exposure…  And so began the great campaign to force us into 5 year fixed rate mortgages.  (by the way, these inflated Variable rate prices only lasted around 6 months…we’re not back to the good old days of Prime less 0.90% but anything at Prime less 0.50% or better is worth a look….it’s worth noting for the record that I still didn’t recommend 5 year fixed rates to my clients during this time… I recommended shorter term fixed rates ranging from 6 months to 3 years and then went back to Variable rate… history has shown that this was the right strategy).

Flaherty and HarperStarting in late 2008, and continuing today, Bankers would call, email or write letters to their Variable rate mortgage clients to warn against higher rates coming…  and they should consider locking into a 5 year fixed rate mortgage.   There were many reasons given… a bad economy… uncertainty in the financial markets… or my favorite, a special rate offer (it was special alright! Lol!!)… And the media jumped in too.  TV, radio, newspapers, major news websites…how many times have you have heard the warnings about rising mortgage rates??…or record personal debt levels??   This created an even higher level of uncertainty and fear… Mr. Potter would be proud!

Think about it… The Banks were strongly recommending that Variable rate clients go from a rate of 3.25% or better, and into a 5 year fixed rate of 5.50%!!? (November 2008).   And the worst part about all this is that hundreds of borrowers listened and did it… and have regretted it ever since!!!  Where’s your Banker now?…

watch for part 2 of 2… FED GOVT, BIG SIX BANK’S pushed us into Fixed rates!… tomorrow!

Getting a mortgage today?  Speak with a Mortgage Broker…and think twice about sticking with your BANK…. you could just save yourself $thousands.

As always, I welcome your comments and questions.  Let me know if I can help.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

$4k penalty on a $109k mortgage… $8k penalty on a $213k mortgage.

This week I received a few more examples of the ridiculous penalty calculations that the BIG SIX Banks have been using…  If these penalties don’t scare you, then continue to deal with the BIG SIX.

One client has a mortgage with Scotiabank….$109k balance with a 3.60% interest rate and 3 yrs remaining… her penalty to get out is $4,000…!   That’s 10 months worth of interest.

Another client has a mortgage with TD Bank….  $213k balance with a 5.35% interest rate and 1 yr remaining… his penalty is over $8,000…..!  That’s equal to almost 9 months worth of interest.

If these penalties scare you then keep reading…there is a solution…

There are better alternatives to the BIG SIX Banks….  There are several smaller Lenders, good reputable firms, that don’t use the same formula to calculate your penalty….. and you don’t have to give up anything on rate, terms or prepayment privileges…

Had the Scotiabank client gone with one of my other Lenders, then her penalty would have been around $1340…   and the TD Bank client’s penalty would have been around $5140.

Get an unbiased opinion…. Speak with a neutral party…. Call your Mortgage Broker before making any decisions….  If you don’t have a broker, call me…I’ll be glad to help.

$24,000 and $19,000 in savings by refinancing their mortgages.

We’ve seen a growing trend lately… Customers calling to find out if there was any way to take advantage of today’s record low rates…..   If you are buying for the first time or are renewing a mortgage, then the answer is simple… YES..  But what if you are one of the thousands of Canadians that listened to their Bankers and the media or so-called ‘Experts’ and took at Fixed rate mortgage a few years ago.

You have a rate of 4.00% to 5.50% and you keep reading about record-low interest rates in the low 3.00% range….. what can you do?   Well, here are 2 recent examples…. These are real clients….  These are real savings…

So where was the Banker in all this?  Why didn’t the Banker call these clients to make them aware of the huge savings?   In case you didn’t know it, the Banks are a business… and they want to maximize their profit.    Don’t ever forget that.

CASE STUDY #1… 6 YEARS REMAINING AT 5.45%

We had a new client contact us with a $350k mortgage… they were with a BIG SIX bank.. their penalty to exit would be $10k… that’s a lot of money, and we don’t like anyone to pay penalties…..but we did the math and found this client a 3.29% mortgage for 5 years… the end result worked out to be a gross savings of $34,000…  After paying the penalty, they realized a savings of $24,000 over the next 5 years.   WOW!  That’s an easy decision to make.. the clients also decided to add the penalty into the mortgage…. imagine savings almost $5,000 per year!

CASE STUDY #2… 7 REMAINING AT 5.25%

Another client had a $235k mortgage… also with a BIG SIX Bank… penalty to exit was $4k…. we also found a 5 yr mortgage at 3.29% for this client… the savings worked out to $23,000…less the penalty, that worked out to $19,000 in savings over the next 5 years!…  Again, a no-brainer… Clients moved on this right away… we added the penalty into the mortgage and put almost $4,000 per year, into their pockets.

CAN YOU SAVE ON YOUR MORTGAGE?

We’re seeing more opportunity to save money by taking advantage of today’s low rates…. Don’t wait for your Bank to call.   These are just a few, recent examples.  If you’ve been thinking about how you can save on your mortgage, then take a few minutes and look into it.   Get your mortgage reviewed by an unbiased person.  Call a good Mortgage Broker.  It could be worth a closer look.   If you don’t have a broker, then feel free to contact me and I’ll do some quick math.   You might be pleasantly surprised with the results.

We’ll be sharing more of our success stories and tips on how you can save money on your mortgage.

Mortgage penalty rules change… finally.. well, sort of…

The Federal govt announced some changes to protect Canadian Consumers… including rule changes to credit cards and mortgage prepayment information.   Here’s a link to the entire news release.

For our purposes, we are focusing more on the mortgage prepayment announcement.   Here’s a link to that portion of the news release.

There are 5 Elements to the Code of Conduct for Federally regulated institutions.  The changes must be implemented within 6 to 12 months.   In short, the new Code of Conduct rules will require these lenders to provide clear disclosure on how penalties are calculated, along with online calculators and access to knowledgeable staff that can be contacted through a toll-free phone. Continue reading “Mortgage penalty rules change… finally.. well, sort of…”

Consolidate your debts and save money with today’s record low rates.

It’s December 2011, fixed mortgage rates are at historical lows…a 5 year fixed rate can be had for 3.39% and in some cases, even 3.29%.   Does it make sense to refinance your mortgage and consolidate that car loan, student loan, credit card, line of credit or other debt?   The answer is an overwhelming YES!

Compounding interest rates are a killer.  If you have $20,000 or more in non-mortgaged debt, then you should consider consolidation.   Especially with today’s record low interest rates.

Here’s an example of one situation:

 Rate  Balance  Payment
 Mortgage 3.99% $300,000 $1,349
 Car loan 6.00% $24,000 $563
 Credit Cards 18% $10,000 $300
 Line of credit 7% $10,000 $300
mortgage penalty $2,993 $0
 Totals $346,993 $2,512

And here’s what the new situation could look like after consolidating their debts:

 Rate  Balance  Payment
 Mortgage 3.39% $346,993 $1,533
 Car loan $0 $0
 Credit Cards $0 $0
 Line of credit $0 $0
mortgage penalty $0 $0
 Totals 3.39 $346,993 $1,533

So in this example, we are reducing the monthly payment by $979.00.     Let’s take some of that money and put it towards your new mortgage… if you took $500/mth and put this towards your mortgage for 5 years, you would reduce your amortization to 10 years and 7 months.   Clearly, this is worth breaking the mortgage and paying the penalty.

(keep in mind, the penalty could be higher if the lender uses an Interest Rate Differential to calculate the penalty… Always speak with your Mortgage Broker to ensure the penalty is accurate).

 

 

CBC news reports Scotiabank slams client with $30,000 penalty!

A word about world events the past 4 weeks…  We have seen a lot of turmoil overseas……  Egypt, Libya  and other middle east countries…. We need to pay attention…. Let’s hope for an immediate and peaceful resolution…

The Tsunami in Japan has been horrible… the images on TV are tough to watch…what a tragedy… Our hearts go out to the people of that nation.

Fixed rates drop slightly and Variable rates remain flat.

We have also seen how mortgage rates can be affected by these events… The uncertainty has caused the Bond market to fall…. and we even saw a very small rate reduction by the Big Banks… Posted Fixed rates are down around 10bps… 5 yr fixed is 5.34%. Continue reading “CBC news reports Scotiabank slams client with $30,000 penalty!”

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