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TagRefinance

Mortgage refinances are down nearly 40%.

Mortgage refinances are down in Canada according to CMHC…. No big surprise to those of us in the Mortgage industry…   The govt has made it more difficult to access money over the past 3 years with all the Mortgage rule changes.    They have accomplished their goal of trying to discourage us from borrowing more.

Here’s a look at some of the rule changes that made an impact:

-mortgage refinances are capped at 85% loan to value from 95% loan to value just a few years ago.

-maximum amortization for hi-ratio mortgages (over 80% loan to value) is 30 years.  Down from 40 years.

-variable rate mortgages and mortgages with terms less than 5 years must be qualified at the Bank’s POSTED 5 year fixed rate… this too will squeeze out many more borrowers as it forces us to qualify at the much higher POSTED rate…. 5.39% vs a discounted fixed rate of 3.49%….

The Banksters are happy to see you take the much higher 5 year fixed rate vs the lower, Variable rate (current Variable is hovering around 2.40%… RBC is advertising their  and Bank’s are advertising their 5 year fixed rate special offer at 4.24%…..).   Banks make more money on the 5 year fixed vs the Variable rate.  Remember that when choosing your next mortgage term.

Oh, and by the way, there are better Fixed rates out there…  we are currently seeing 3.49% for 5 years from the wholesale market.

New Mortgage rules… let’s make it an annual event!

The Minister of Finance, Jim Flaherty, announced some changes to Canada’s mortgage rules that come into effect March 18, 2011…… these rules apply to hi-ratio insured mortgages… those with less than 20% down payment….

-The maximum amortization is reduced to 30 years from 35 years.

-The maximum loan to value available for refinancing your home is 85%, down from 90%.

-Secured lines of credit (or HELOC’s Home Equity Lines of Credit)  will not longer be insured meaning the maximum loan to value will now be 80%.

Click here for the official government announcement.

Not the first time for mortgage rule changes.

This is becoming an annual event with the Government:

In 2008, the Govt reduced 40 year amortizations to 35 years, eliminated the 100% loan to value mortgages and the interest only mortgages.

In 2010, the Govt brought in some of their biggest changes yet…borrowers would have to qualify for variable rate mortgages or short term mortgages at Bank posted rates…Self employed individuals would now have to qualify with traditional income verification if they were in business for more than 3 years…. Refinancing would be capped at 90% loan to value, down from 95% loan to value… and investment properties or rentals would require a 20% down payment…

(By the way, the govt also announced they would be standardizing mortgage prepayment penalties… we STILL haven’t seen any announcement… Mr. Flaherty, you want to help Canadians?  Change the mortgage penalty calculations!)

Has the govt gone too far?

Apparently, rising personal debt levels are the driving force behind these changes… The govt wants to make sure we don’t borrow more than we can afford…. But with mortgage defaults well under 1.00% (that’s extremely good), why would the govt pick on mortgages?   After all, wouldn’t any Financial Advisor recommend that you consolidate your high interest credit cards, lines of credit, car loans, student loans and other personal debts into a LOWER RATE product?

Why isn’t the government making changes to loans, unsecured lines of credit, credit cards….?   All these products have higher rates of interest and higher rates of default.   Think about this for a minute… we are making it harder for Canadians to take lower interest rate products (mortgages)… Where will they go?   Yes, that’s right… directly to the higher interest rate products…. Credit cards, loans, etc….  (I think I might buy some Bank stock today… or any other financial institution that offer credit cards or loans.)

So let’s see if I’m getting this straight…. we want to stimulate the economy and spending so we’ll keep interest rates low… but we are concerned about rising personal debt levels so we’ll make it tougher to get a mortgage (even though mortgage defaults are extremely low)… but we’ll keep those high interest rate loans, credit credits, etc as is…..  Is this making sense to anyone?

We’ll be sharing more on this latest announcement in the coming weeks…

Uncover the hidden equity in your home

Turn on the TV, listen to the radio, read a newspaper or talk to someone at the office water cooler.   What are we hearing?  ‘House prices fall’….  ‘Mortgage rates are going up’…

Okay, are you ready to hear some good news?   Let’s talk about what’s really happening and how YOU can benefit.

Firstly, house values are actually stable according to the Canadian Real Estate Association (CREA).  The article goes on to say that House sales may cool this fall due to a robust Spring market and that house prices may fall.  Hey, that’s okay.. we don’t want to see a runaway market… but that should trigger us to do something now.   Take advantage of these incredibly low rates.

Interest Rates are at historical lows and yet I don’t see much news coverage about that…did you know that a 5 year fixed rate can be had for around 3.69% and in some cases even better for qualified borrowers….   Variable rate is also great… 2.30% is an excellent rate…. and Economists are forecasting for no real increases until the Spring…

REFINANCE WHEN RATES ARE LOW

It’s really no secret…. you’ve heard of buy low and sell high?… well, with interest rates it’s ‘borrow when rates are low and get rid of high interest rate debt’….. This is the best time to borrow money. Here’s how you can benefit….

Let’s suppose your situation looks like this:

  • have a house worth $350,000
  • a mortgage balance of $200,000 @ 5.00% with payments of $1,100/mth.
  • credit cards $8,000 @ 12.00% with payments of $240/mth
  • a line of credit $10,000 @ 6.00% with payments of $300/mth
  • car loan of $15,000 @ 6.00% with payments of $480/mth
  • you want to invest some money into rrsps or resps or some other GOOD investment for $20,000….
  • your monthly payments total $1,640.

Here’s what you could be doing:

  • increase your mortgage by up to $80,000 to $280,000
  • pay off all that debt and take the extra funds (up to $47,000) and invest or use as you require
  • your payment based on today’s 5 year fixed rate of 3.695 would be $1,427/mth
  • your payment based on today’s Variable rate of 2.30% would be $1,227/mth

Your cashflow would actually improve and you would put money in your pocket.

This is just one example of how you could benefit… we all have different needs and different situations…get your finances analyzed by a qualified Mortgage Broker.   See how you could benefit….It’s a great time to borrow…