Mortgage Intelligence

Oshawa's Mortgage News Desk!


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Purchase or refinance now before rules change in January

If you’re looking to buy and will have more than 20 percent down, or if you are considering refinancing, then you might want to do so before January 1, 2018. Why? On October 17, the Office of the Superintendent of Financial Institutions (OSFI) released new guidelines for residential mortgage underwriting at all federally regulated financial institutions. Starting from January 1, 2018, a new ‘stress test’ will be applied to all new conventional mortgages – and not just those mortgages that require mortgage insurance (downpayment or equity of less than 20%).

The so-called “stress test” is designed to protect homeowners should interest rates rise. Lenders will be obligated to qualify all new conventional mortgages at the greater of the Bank of Canada’s five-year benchmark rate (currently 4.89%) or the contracted rate plus 2%. So if your contract rate is 3.29%, you will be qualified at 5.29%.

Here’s what that might mean for you:

You want to buy a home with more than 20% down. Your payments will always be based on your contract rate so this new rule isn’t costing you more. However, the new rule changes how much mortgage financing you would qualify for. If that’s the case, you may need to look at a less expensive home, save up for a larger downpayment, or reduce any other debt. Or we can take a look at a variable rate mortgage that lowers your qualifying rate (if the rate plus 2% is less than the benchmark 4.89%) and has the option to convert to a fixed mortgage.

You want to refinance to pay off debt or buy an investment property. Here too, your actual mortgage payment will not be affected.  But the new rule could slow you down by making it more difficult to qualify for your refinance. You may need to wait and accumulate more equity, or look at a lower-rate variable mortgage.  If that refinance is important to securing your own financial health, get in touch with the team at MiMortgage.ca ASAP.

Your mortgage comes up for renewal next year. This more stringent qualifying requirement will not apply to mortgage renewals. If you go shopping for a better deal with a new lender, however, that will require that you re-qualify… and the new rule will kick in for you too. It still is very important that we review your options together.

What can you afford?

New mortgage qualifying for purchases with 20% down

Household Income Purchasing Power Today Purchasing Power    Jan 1, 2018
$60,000 $409,626 $334,323
$100,000 $682,710 $557,206
$150,000 $1,024.065 $835,809
$200,000 $1,365,420 $1,114,411

For illustration purposes only. Based on 25 yr amortization, 20% down purchases, 5 yr term, qualifying rate 3.29% today and 5.29% January 2018. Does not include property taxes, heat or condo fees. OAC.

Get in touch now – you have the rest of 2017 to get in under the old rules. Going forward, we’re here to work with you early in the process to make sure you are fully prepared for your purchase or refinance. We also have access to non-federally regulated lenders that do not fall under this new guideline. We’re always here to answer your questions, so feel free to contact the experts at MiMortgage.ca at 1 866 452-1100 or by email any time!

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Back to school on saving money

September is here so let’s use that brisk back-to-work attitude to make sure your personal finances are on track to save you money over the long term.  If we haven’t talked in the last year, or if any of these situations apply, please get in touch:

  1. You are considering a refinance for any reason – too much high interest debt is making cash flow tight, or you are considering a renovation, investment property, or have a large looming expense.  Proposed new mortgage rules include stress testing for conventional mortgages which, if implemented, will make refinancing more difficult for many Canadians.  Don’t delay; the new rules could be in place before year end.
  2. You are thinking about moving to a new home and want to review your mortgage options.
  3. You are wondering if you should lock in your variable-rate mortgage.
  4. Your mortgage is coming up for renewal and you want to guarantee your rate now and ensure you get the best deal possible.
  5. You know someone who could benefit from a fresh look at their mortgage options and would appreciate paying the least amount of interest and fees during their mortgage years.

Always keep in mind that the right mortgage plan can save you thousands of dollars!  Enjoy the fall season, and thank you so much for your ongoing support.

P.S. Do you have any home improvement store purchases coming up?  We have a new product that will save you money on these purchases.  Contact the team at MiMortgage.ca at 1 866 452-1100. Let us know if this applies to you!


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After the rate hike, what’s next?

On July 12th, for the first time in seven years, the Bank of Canada increased the overnight rate by .25%, withdrawing some of the stimulus that was needed after the oil price collapse and 2008 financial crisis. Variable rate mortgages and lines of credit will see higher rates and modest payment increases. Fixed-rate mortgage – which are based on the bond market – had already been trending slightly upward, although if you have a fixed mortgage, you aren’t affected until it’s time to renew. Keep in mind that this is a very small increase, and we’re still in an ultra-low rate environment and an incredibly stable market. We’ve also seen increases before to only see them decrease again. But rates have risen, so here are answers to the questions we’re getting:

Should I jump into the market now?  Actually, our advice is always the same: buy when you are financially ready. Don’t jump the gun just because rates “may” go higher.  But by all means, if you’re thinking about buying, we can arrange a pre-approval so you’re protected from rate increases while you shop around.

Should I lock in my variable rate mortgage ASAP? That depends. Your new rate with the hike is probably still less than current 5-year fixed rates, and you’ll still likely pay less if there is another .25% increase. So why pay more money than you have to? Stick with your original strategy of focusing on payment vs. rate. But if it’s going to keep you awake at night – or the few extra dollars are hard to find in your budget – then let’s talk about your conversion options. Remember though, you should be confident you’ll stay in a 5-year fixed mortgage for the full term. Breaking a fixed mortgage can result in some tough penalties.

What if my mortgage is coming up for renewal? Don’t feel rushed or pressured by a renewal letter or call. Let’s discuss your options. We’ll review your renewal offer together and we’ll shop around to see if it’s really the best deal available. Got too much other debt? This may be the time to roll it into a new mortgage to boost cash flow and save on interest costs.

Should we talk? Yes for sure. You should have confidence in your mortgage plan and that’s why professional mortgage advice is so critical.  We have access to a wide range of lenders and know the right questions to ask to assess your situation and make sure you have the best mortgage strategy. Contact the team at MiMortgage.ca at 1 866 452-1100 to speak to an expert or apply online now!

 


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“Conditional on financing”: the most important part of your offer

When you find the condo or house of your dreams and want to make an offer, do you need a financing condition?  Unless you can pay cash for the home, then yes you do. That little phrase – “conditional on financing” – is an important protection for buyers.

When an offer to purchase is made “conditional on financing”, we gain the time needed i.e. 3 to 5 days to ensure that you are fully approved for the necessary funds. Your lender needs to feel as comfortable about the property as you do and will likely conduct an assessment. After all, the property is the lender’s security if something goes wrong. Even if you have a mortgage preapproval, the lender may decline the property for reasons such as:

  • The address may be just outside the acceptable location perimeter for the lender.
  • Concern over a former grow op, an environment matter, or zoning issues.
  • The appraisal may not match the offer you’ve made.

Don’t let the rush to buy overcome common sense. A preapproval is a guideline only, and a lender could disregard it: especially if your income or financial situation has changed. That “conditional on financing” gives you time to confirm with the lender, and to withdraw the offer if the lender’s queries turn up something negative about the house.

An offer without conditions leaves you and your family on the hook. If the financing falls through, you will lose your deposit, and could be sued by the seller. It’s not the happily-ever-after scenario you envisioned when you made your offer. If you really want to put in an offer with no financing conditions, the team at MiMortgage.ca can assist you in mitigating your risk i.e. review the strata docs, listing information, and contact the lender and insurer about the property prior to writing the offer, which can help eliminate some of the risk but nothing can be 100% guaranteed.  Let the team at MiMortgage.ca help you make sure your homebuying journey has a happy ending.


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What is the Qualifying Rate?

In 2010 the Department of Finance introduced the Qualifying Rate to assess borrower eligibility and ensure that potential borrowers can maintain their payments should rates begin to rise. The qualifying rate is a 5-year rate published every week by the Bank of Canada, and will be higher than your actual contract rate. The Bank of Canada surveys the six major banks’ posted 5-year fixed rates every Wednesday and uses a mode average of those rates to set the official benchmark.

As a result, your lender is required to use this rate to calculate debt service ratios when reviewing mortgage applications for all insured mortgages. Prior to October, 2016, this financial “stress test” was applicable for fixed-rate mortgages with terms of 1 to 4 years and all variable-rate mortgages. Now, it also applies to fixed-rate insured mortgages of 5 years or longer, and some conventional mortgages.

Although we can find you a much better mortgage rate – you’ll still need to show you can maintain your mortgage using the higher qualifying rate. While you must “qualify” at this higher rate, your actual payments will be based on your lower mortgage contract rate.

Our goal is to provide expert advice, education and resources that homebuyers need. It’s important that you understand the terms you agree to when making what is likely your biggest purchase decision. Want to learn more about the qualifying rate and how it applies to you? Contact the team at MiMortgage.ca now. We’re here to help you!


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Why Mortgage Before March 17?

db14142_fb_homeowners_i14759090_miIf you’re in the market for an insured mortgage, then you might want to get that mortgage before March 17.

Canada Mortgage and Housing Corporation (CMHC) is raising premiums for insuring mortgages on Canadian homes for the third time in three years. Canadian homebuyers are required to have mortgage insurance if they have less than a 20 per cent downpayment. The insurance provides protection for the lender in the case of a default.

How will it hit your wallet? The increase is not too significant for those making the minimum downpayment required. A homebuyer with a $250,000 mortgage and a 5 per cent downpayment will only pay about $5 per month more in insurance premiums.  We can calculate exactly how much the increase will mean to you if you get your mortgage approval on or after March 17.

The increases are actually more substantial for larger downpayments of 15 per cent or more. Those with 20 per cent or more downpayment aren’t required to have mortgage insurance, although it’s used by lenders that securitize their mortgages. As a result, any increased cost will likely be passed on to customers through higher rates.

Premiums are also increasing for “non-traditional” insured mortgages i.e. home buyers with borrowed downpayments, a type of mortgage downpayment that could grow in popularity as homebuyers strive to gain entry in the housing market.

The premium change will come into effect on March 17. Homebuyers will be able to access the current lower rates if they have bought a home and are approved before the March 17 deadline, even if they have a later closing date.

If you are looking to buy, get in touch with the team at MiMortgage.ca today!


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Surviving and Thriving: Your Mortgage Blueprint for 2017

blueprints

Image by courtesy of scvnest.com

Canadians are definitely talking about the housing market – what do the new mortgage rules mean, is this the right time to buy, have mortgage rates bottomed out, is a lender’s renewal offer the best available, and on and on! For many, it feels like some uncertain times ahead. Often it’s just a few sensible strategies that can help you survive and thrive in the current climate:

  1. Take care of your credit. It’s so important to have good credit behaviours so you always qualify for the best mortgage rate. Pay your bills on time. Don’t let your credit accounts exceed 50% of the credit available. Also don’t apply for a store card just to save on your purchase that day! Before you cancel any credit cards, speak to an expert and get advice.
  2. Let renters help pay your mortgage. A home with a rental suite can be a great option for homebuyers, especially if the area you love is pricey or you don’t want to buy a condo at a lower cost. It’s also a great option for existing homeowners looking to lower their mortgage payment.
  3. What’s the prepayment penalty? If you ever need to get out of your mortgage early, the right mortgage could save you thousands!  Not all lenders calculate penalties the same way, and the differences can be substantial. It helps to know which lenders have the most fair prepayment penalties and your mortgage broker will have that information at their fingertips.
  4. Choose low-interest debt. Whatever your need might be – paying down high-interest debt, funding education, a large purchase, investments, or renovations, your mortgage might be your most cost-effective financing option, if you have enough home equity.
  5. If you bought your first home in 2016 you may be able to take advantage of the $5,000 non-refundable Home Buyer Tax Credit amount, which provides up to $750 in federal tax relief.  Not sure if you qualify, just ask!
  6. Renovate over relocate? The right renovation might be all it takes to turn the house you’re in, into the home of your dreams. It is almost always less expensive to renovate than to relocate! We have great renovation financing options if that’s where you’re heading!
  7. Renew with your eyes open. When your lender sends out a letter suggesting you renew your mortgage at their current offer, speak to your mortgage broker, get advice.  Don’t renew with your eyes closed! This is your opportunity to negotiate the best possible deal!
  8. Speed up your mortgage pay-down. Change from monthly payments to weekly or bi-weekly payments. Or take your tax refund and put it against your mortgage principal. Your interest costs will go down with every dollar you’ve reduced on your principal.
  9. Don’t neglect your savings. In managing debt, you want to make sure you don’t need to use credit to get you through a financial emergency when your car breaks down or your washing machine quits. Make a point of setting aside a small sum every paycheque into a special emergency fund.

And lastly, it’s always a good idea to get expert mortgage advice well in advance of buying your home, and then always on an annual basis. So take the time to meet with your mortgage broker and get your blueprint for surviving and thriving in 2017.