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Showing posts from 2012

What a mortgage agent does

Many times we hear the question: what is the difference between a mortgage agent and a bank employee taking an application? I would like to suggest what I see is the major difference between a bank and a mortgage agent. Anyone can help an excellent credit worthy client get a great mortgage and it is done quickly. We obtain mortgages from the big banks also. On the other hand some people have seen their credit rating slip usually through no fault of their own. Perhaps a husband or wife lost their job or a construction guy was injured on the job and money is stretched thin and maybe credit card payments are late or missed. EI helps but it is capped and temporary.There are many reasons. Banks don't want to deal with these clients. First Line had a "B" lender side as to Bank of Nova Scotia. They withdrew from this type of lending. This is where we play a critical role. We look for the companies that deal with these types. Many times it is a difficult process but if we get th
Key Findings from the Canadian Mortgage and Housing Corporation 2012 Mortgage Consumer survey Consumers are looking more to the Internet for mortgage information and use of social media is also growing Recent buyers continue to rely heavily on mortgage professionals and others for advice and information on a range of mortgage related topics terms of share and loyalty mortgage sooner improvement consumers and have some unique needs Recent buyers are exploring their mortgage options and are actively engaged in the mortgage process Mortgage brokers and lenders both continue to do well in Post transaction follow-up continues to be an important factor driving client satisfaction and potential future business Recent buyers report taking actions to pay down their While there are positive indicators regarding the financial literacy of recent buyers, there is room for First-time buyers differ from other mortgage To read the entire survey, please visit www.cmhc.ca/2012survey

MAYBE THOSE "GREAT" BANK MORTGAGE OFFERS ARE NOT SO GREAT AFTER ALL

Gary Marr of the National Post has written a great article regarding those deal mortgages banks want to offer you. It’s almost a chicken-and-egg argument, deciding whether the government comes first in the crackdown on consumer borrowing or if the banks should be responsible for reining in Canadian debt. This month, Finance Minister Jim Flaherty sounded like he’d had enough of banks posturing for the federal government to get tougher on borrowers and called on financial institutions to clamp down on their own customers. “I’ve tightened up the mortgage insurance market three times … I really don’t want to do it again,” he told reporters while commenting on the condominium sector. While some bank chief executives have put it on themselves to tighten their own lending rules, others continue to look to Ottawa to take the lead. In the interim, all you have to do is walk into a branch, grab some pamphlets and you will see an array of offers that could get you into even more debt trouble

INTEREST RATE CALCULATIONS ARTICLE

As the deadline for banks to disclose their penalty calculations draws closer, this topic of penalties will be more prevalent. As clients become more aware, will it be a new area of competition forcing lenders to change standard charge terms and all play on the same level field? Breaking your mortgage: Understanding the rules You can pay a high price to refinance a mortgage before maturity. Lenders will soon have to give more information on what to expect. By Ellen Roseman Mortgage rates are falling. You want to break your closed mortgage and get a new five-year loan at 2.99 per cent. Hold on. Take a deep breath. Talk to your lender first. Find out how much you will have to pay to get out of your mortgage early. The penalty could wipe out all your profit on the deal. Mortgage penalties come as a big surprise to borrowers who aren’t prepared for them. Banks are often unprepared as well, since the information is buried in the fine print of a mortgage contract. As a result,

RBC ECOMOMIC OUTLOOK EXPECTS GOOD GROWTH AHEAD

TORONTO - Canada's economy grew at a moderate pace in the final quarter of 2011 and is expected to pick up steam in the year ahead, according to the latest economic forecast from the Royal Bank. The RBC Economic Outlook issued early today predicts Canada's real gross domestic product to increase by 2.6 per cent in both 2012 and 2013. It says burgeoning signs of strength in the U.S. economy, low interest rates, solid corporate balance sheets and elevated commodity prices are setting the stage for continued expansion. The pace of consumer spending eased to 2.2 per cent in 2011, from 2010's rapid 3.3 per cent rise. RBC predicts consumer spending this year and next will grow at a rate comparable to 2011, with durable goods accounting for about a quarter of the increase. Regionally, RBC expects western Canada to top the growth rankings in 2012, with Saskatchewan and Alberta leading the way and Manitoba close behind. Newfoundland and Labrador, British Columbia and Ontario ar

VIEWS ON BANK of MONTREAL'S 5 YEAR RATE

A good explainatory article by Robert McLister of Canadian Mortgage Trends explaining the pros and cons of Bank of Montreal's just announced 5 year 2.99% rate: BMO Cranks Up the Heat Again BMO is dead-set on winning mind share among consumers. It's coming back to the market with two new deep-discount rate promos: A 5-year fixed at 2.99% (which starts Thursday, March 8, 2012) A 10-year fixed at 3.99% (which starts Sunday, March 11, 2012) Both of these specials are low-frills, meaning: A Lower Maximum Amortization: 25 years versus 30-40 years elsewhere Less Lump-sum Pre-payment Ability: 10% maximum per year (i.e., 1/2 of the 20% that BMO normally allows) A Smaller Payment Increase Option: Up to 10%, once per year (again, 1/2 of the 20% that BMO normally allows) A Locked Term: The Low-rate Mortgage is fully closed unless you sell the property, refinance (with BMO only), or early renew into another BMO mortgage. In other words, unle

GOVERNMENT INTRODUCES NEW RULES FOR MORTGAGE LENDERS

Code of Conduct for Federally Regulated Financial Institutions Mortgage Prepayment Information Purpose The purpose of the Code is to ensure that federally regulated financial institutions ("lenders") provide enhanced information in respect of credit agreements secured by mortgages where a prepayment charge could apply ("mortgages") to assist borrowers in making decisions about prepayment of their mortgage. Lenders currently provide substantial amounts of information relevant to mortgage prepayments to consumers in accordance with the requirements in the applicable federal regulations, including but not limited to federal cost of borrowing disclosure regulations and credit business practices regulations. The information that will be provided under this Code is in addition to existing information provided by lenders to borrowers. Application and Implementation Lenders will implement the policy elements of the Code with respect to new mortgages no later than six (

GOOD DEBT vs BAD DEBT

Not all debt is created equal – and not all debt is bad. In fact, you need some debt to establish a good credit rating. Being a responsible borrower means knowing which types of debt can help you reach your financial goals and which types leave you further behind. Good debt includes any investment or purchase that helps improve your overall financial position. Mortgage loans are considered good debt because they offer low rates on property that appreciates in value over the long term. You also build equity as you pay down your mortgage. Borrowing to invest is also considered good debt. Often, the interest expense on money borrowed for investments is tax deductible. And when borrowing to maximize your RRSP, you're investing in your future and benefiting from tax sheltered investment growth. Bad debt involves purchases where the value becomes lower than the original cost, and which can carry a high rate of interest, making them harder to pay off. Types of bad debt include high-

BANK of CANADA WARNING

The Bank of Canada is warning of an impending housing price correction, putting Canadian mortgage holders at risk. In a four-part series of papers, economists at the bank said a drop in home prices could also impact overall consumption and the Canadian economy. In one of the reports, authored by Brian Peterson and Yi Zheng, the bank cautioned that the risk for fluctuations in house prices has “increased markedly.” The authors noted that house prices have risen sharply in most parts of the country over the past decade, with house prices reaching a historically high level in relation to income. The percentage of household debt to income has risen from 110% in 1999 to 153% currently. “These facts (rising debt and house prices) are interrelated, since rising house prices can facilitate the accumulation of debt,” said guest editor Graydon Paulin, introducing the four papers. “Households could therefore experience a significant shock if house prices were to reverse.” The bank also sugges
Good article from the Globe and Mail: Canada’s housing market has two good years ahead of it yet, Canada Mortgage and Housing Corp. said Monday, with low interest rates and a “moderately” expanding economy keeping price corrections at bay. The Crown corporation – which insures Canadian mortgages – has had a consistently rosier view of the market than many private sector forecasters. Canadian banks have recently issued reports probing the consequences of cheap money, and trying to predict whether there is a bubble in prices that will eventually pop and cause prices to crash. They are particularly concerned about Vancouver and Toronto, where some have predicted price corrections of up to 10 per cent because of overbuilding in the condo market. But CMHC said Monday Canadian markets would “remain steady in 2012 and 2013. “With the Canadian economy set to expand at a moderate pace and mortgage rates expected to remain low, activity levels in 2012 in both new home construction and sales

CAAMP'S VIEW ON TODAY's MORTGAGE ISSUES

BASED ON OUR RESEARCH AND KNOWLEDGE OF THE SECTOR, WE SEE NO REASON TO TIGHTEN OR RESTRICT ACCESS TO RESIDENTIAL MORTGAGES AT THIS TIME 1. CURRENT ENVIRONMENT Canada has a well-earned reputation for exercising economic prudence. As a result, we have managed to avoid a mortgage or housing market meltdown. Our banks are stable and our economy, while impacted by the general global economic slowdown, remains healthier than most. CAAMP’s extensive industry research indicates that the Canadian mortgage industry is healthy. We must continue to “stress test” our own financial sector to determine how it would withstand potential weakening of the economy. The more educated we are about the debt we incur (mortgages, credit cards, lines of credit), the better off we will be 2. FEDERAL GOVERNMENT ACTIONS TAKEN The federal government responded promptly when it was determined changes were needed in the mortgage market. There have been three significant sets of changes in the past 36 months:

More Down Payment May Cost You More Money

The search for conventional mortgage financing just got tougher -- and may get tougher still -- with several Canadian lenders moving to cut their rental programs because of tighter access to bulk insurance. FirstLine, the CIBC-owned broker channel lender, kicked off the latest round of downsizing, last week announcing it would impose a $750,000 cap on rental property loans up to an 80 per cent loan-to-value. That’s $250K less than what owner-occupieds can qualify for. Street Capital announced a similar decision last week, axing its rental program altogether. And while it will consider exceptions on a case-by-case basis, that’s only where clients are willing to pay default insurance they technically do not need. Under Canadian mortgage rules, borrowers opting to go conventional by putting down a minimum 20 per cent are exempt from that requirement. But increasingly lenders have opted to insure those loans themselves through bulk insurance offered by the CMHC. The practice allows them

CMHC CUTTING BACK ON INSURED MORTGAGES

(From the Financial Post) Canada Mortgage and Housing Corp. is cutting back on mortgages it insures as the Crown corporation edges closer to a $600-billion cap imposed on it by the federal government, the Financial Post has learned. A CMHC spokesman confirmed that it had approached a number of lenders at the end of 2011 about reducing its “bulk or portfolio insurance” after third-quarter results showed the agency had committed to back $541-billion in mortgages. CMHC, which guarantees mortgages held by financial institutions, is ultimately backed by the federal government and needs approval to go over the $600-billion limit — something that would create greater risk for taxpayers should the housing market collapse. “CMHC has recently received an unexpected level of requests for large amounts of CMHC portfolio insurance.” said Charles Sauriol, a spokesman for the Crown corporation, in an email. “To ensure equitable access to portfolio insurance within CMHC’s annual limits, an allocat

MORTGAGES FOR NEW IMMIGRANTS

A Home of Their Own – New Immigrants Face Hurdles New Canadians are making their numbers felt in the housing market, as they get settled and make the transition from renter to owner, purchasing their first homes in this country. Over 280,000 new immigrants arrived in Canada in 2010, the highest amount in 50 years according to the Department of Citizenship and Immigration. Immigrants are expected to play a large role in the housing market in the coming decades. Between now and 2031, the foreign-born population of Canada could increase approximately four times faster than the rest of the population. For these new Canadians, first-time home ownership may prove harder than anticipated, as they face some unforeseen obstacles, but there are definite opportunities. Lack of Credit History The biggest challenge for new immigrants is establishing credit because they do not have a financial history in Canada. Without a credit history, it can be a struggle to get mortgage financing. It is impo

LOOKING BEHIND THE 5 YEAR RATE SPECIAL

A peek behind deeply discounted 5-year rates. A major bank has offered a record low 5 year interest rate. However it is a 2 week special only. Is it as good as it appears to be on first glance. Let’s look a little deeper. When considering a deeply discounted 5-year rate, keep in mind that cheapest isn’t always best. Strangely, we know that’s true when we’re shopping for anything else - but we still tend to believe that lowest rate is the one and only factor in choosing a mortgage. But, that low-rate mortgage could actually cost you more in the long run. An amazing cut-rate mortgage could have you locked in to a very rigid contract filled with financial “trip lines” that could work against you down the road. That’s why it’s important to check the fine print. For instance, is the mortgage fully closed? That means you’re not leaving the lender unless you sell your house, so your options are limited and you have no negotiating power if your needs change in the next 5 years. Low or no p