What’s The Deal? Low-rate Mortgage Offers

London Ontario Low-rate mortgage offers

I’m Andrew Young of Mortgage Wise Financial and Community Mortgage Movement.

What’s the deal with super low-rate mortgage offers?

I just want to go over a few different things before you lock yourself into something you don’t really want or something you don’t really need. What I want you to understand is what are you sacrificing to get a very low interest rate? Here are a couple things you should watch out for on low-rate mortgage offers.

Low-rate Basic Mortgages

These are low-rate mortgages that sometimes may include a reinvestment fee. A low rate basic mortgage will offer you an unbelievably low interest rate. So, what are you sacrificing with this type of mortgage? One of the main things you are giving up is your flexibility. Let’s say you were to break your mortgage after the first five years, there is generally a percentage of a penalty you will pay. So, if you break your mortgage early, you will generally have to pay a penalty (this is normally around 3%). These mortgages need to make their money somewhere! So, let’s say you have a mortgage of $400,000 that is a $12,000 penalty fee!

Reinvestment Fee

Some lenders are adding reinvestment fees into their mortgages. Some of the mortgages that we have seen here have these reinvestment fees added into their mortgage, they have a gradual decline over the five-year period, some dropping by .25% each year.  If you are 99% percent sure that you are going to stay at this property for five years it might be worth it to just wait it out, if not you should start considering other options.

What I like to do is a suitability analysis. We try not to sell rates as much as possible, I would prefer to find out what you need first before I come up with a solution.

I’m Andrew Young and that’s the deal!

Self Employed & Looking For A Mortgage?

Self Employed London Ontario

What’s the deal with being self employed?

I’m Andrew Young from Community Mortgage Movement and Mortgage Wise financial here to talk to you about being self employed and getting a mortgage if you are self employed.

So, you’re self employed? Well congratulations! So now you want to purchase a home – so, what do you need when it comes to looking for lenders?

Most lenders generally want to see at least 2 years minimum self employed or sub contracted income. When it comes to income, lenders will use a 2-year average from your line 150 from your T1 Generals or your Notices of Assessments. Don’t worry there are some opportunities when it comes to grossing up your income by a certain percentage or we also can add back some of the expenses to help get you to the mortgage amount you are looking for.

There is also the opportunity to use the Stated Income Mortgage Program. What is the Stated Income Program? Stated Income means exactly that. When a mortgage application is created, for a self-employed or commissioned applicant, and the entire income amount is not verifiable in traditional documents, for example a Notice of Assessment, the applicant may apply under the Stated Income program to allow an income adjustment to help qualify them for a home purchase or re-finance.

So, using the Stated Mortgage Program we take your stated income and inflate it by a reasonable rate to take into consideration, due to your profession (this is to consider your expenses and cash components of your job). All of this is to help make sure we can get you to the mortgage you want to be approved for.

I’m Andrew Young and that’s the deal!

A & B Lenders and Private Mortgages

A & B Lenders

Andrew Young from Community Mortgage Movement here. What’s the deal with A & B Lenders and Private Mortgages?

Today we are going to be going over what is an A Lender, B Lender and a Private Mortgage. But first here is a little more info on what mortgage agents and mortgage brokers do. I myself am a mortgage broker and can not only deliver a lot of different options and a lot of choices because we deal with different types of lenders. So, what’s the deal with these lenders?

A Lenders:

Also known as traditional lenders, refer to banks or credit unions that traditionally cater to customers with good credit scores and have a reliable income – These are considered “A” Clientele.

Institutions servicing an “A” clientele include Canada’s major banks — e.g., BMO, CIBC, National Bank of Canada, Scotiabank, RBC, and TD. These banks are subject to federal regulation, which means that you’ll be stress tested when you apply for a mortgage.

B Lenders:
These institutions offer a lower barrier of entry to qualifying for their products but can offset that with higher interest rates. In short, they cater to people who may not qualify for say, a mortgage or a credit card at one of Canada’s six big banks, because they lack either a strong credit history, or a guaranteed income (recent immigrants, or the self employed, for instance).

Private Lenders:

These are the lenders that can help fill the gaps between the A & B lenders. These lenders are not just for people in a really bad financial situation, it could also be for people who are looking to build something that is a little more unique, as the banks might not understand or the banks don’t have the hunger for.

Mortgage Rates and Why They Rise and Fall

Mortgage Rates Rise and Fall

There are many factors that influence the overall health of the Canadian economy; unemployment, inflation, consumer confidence and the housing market, just to name a small few.

 

Factors affecting the Fixed Mortgage Rates

 

One of the main factors that affects fixed mortgage rates is the Government of Canada Bond Yields. Fixed mortgage rates normally move in alignment with the Government of Canada Bond Yields.

 

Bond Prices and Bond Yields

There is a negative relationship between bond yields and the price of bonds. Meaning that when bond prices increase, the bond yields decrease and when bond prices decreases, the bond yield increases. Bonds are historically safer than stocks, especially Government issued bonds and due to this bond prices for Government bonds decrease when the market is booming and increase when the market is dipping

 

Bond Yields and fixed rates generally have a positive relationship. Meaning that when bond yields increase, fixed rate also increases.

 

Stock Market

When the Stock Market is booming, investors are more likely to make a higher return on investment equities than investing in bonds. This means that the demand for bonds decreases and as such the bond price decreases and the bond yield increases and this will lead to an increase in the fixed rate. On the other hand, when the stock market is dipping, and stocks do not look as enticing, investors are more likely to invest in safer investments, such as bonds. As such the fixed rate will likely decrease due to the price of bonds increasing, the demand for bonds increasing and the yield of bonds decreases.

 

Factors affecting the Variable Mortgage Rates

 

The bank of Canada is responsible for changes to variable mortgage rates because they determine the target overnight lending rate.

 

Variable Rates and Overnight Rate

The overnight rate changes the cost of lending/borrowing short term funds and therefore influences the prime rate. Meaning when the prime rate goes up, so will your variable rate and monthly payments, as prime rates are linked to variable mortgage rates.

 

Prime -/+

Variable mortgage rates are normally advertised as Prime plus or minus (insert rate here), which means the interest you pay is directly related to the Prime Rate and will fluctuate whenever these change. Let’s say the current overnight rate is 0.5% and the major banks prime rate is 2%, and at that time the variable mortgage rate is – 0.50% (thus 1.5%). If the Bank of Canada increases the overnight rate from 0.5% to 0.75% (an increase of 0.25%), the banks will likely follow suit and increase their prime rate by the same 0.25% to 2.25%. Your variable mortgage rate will thus also change due to this increase in the prime rate, making your new variable mortgage rate 2.75% – 0.50% = 1.75%.

Down Payment and the Next Steps

Down Payment

So, you’ve finally got the money the need to make a down payment on your house, congrats! So, what are some of the next steps in this process?

 

Confirm the details

 

To fulfill the conditions of your mortgage approval, you’ll need to document almost everything you do. This is required by all lenders to ensure that you are not borrowing against your down payment and to help protect against fraud.

 

Here’s what you will need:

 

A 3 Month History

You will need a 3-month history of any bank accounts that you have been using to get your down payment. One of the most important parts of this is that your name is linked to the account, as some printouts do not show a name. Talk to your mortgage advisor about this if you have any concerns

 

If You Had Large Deposits

If you had any large deposits within the last 3 months, you will need to show where they came from. An example of this might be if you sold a car, make sure to keep the bill of sale or if you transferred money into the account, make sure to bring the records.

 

If It Is a Gift

Gifted funds can only come from immediate family members (parents, grandparents, siblings). There must also be a signed gift letter and a bank statement from the giver to verify the funds.

 

If You are using money from your RRSP

If you are withdrawing under the Home Buyer’s Plan, the funds must have been in the account for 90 days.  Also make sure you budget enough time (about 30 days) to make sure your funds can be transferred out in time. You will also need to show a 3-month history of your RRSP

 

If You are Getting money from Outside of Canada

It is important to get the money into the country at least 30 days before funding. Some lenders might ask that the money must have been in a Canadian account for more than 90 days, so make sure to ask about this early!

 

Regularly Deposit Cash into Your Accounts

As stated above lenders do not like to see giant deposits into your accounts and they especially don’t want to hear that you’ve been stockpiling your money and not depositing it into a bank.

 

If the Down payment is coming from the sale of your existing house

It is important to provide a firm purchase and sale agreement, and the current mortgage statement. Some lenders will also ask for the real estate lawyer’s letter of disbursements, to see how the proceeds of the sale will be divided up.

New Mortgage Rules and Their Effects

Mortgage Rules

The Canadian Government announced that it would be changing the rules regarding mortgages for Canadians. This new rule would came into effect on January 1, 2018 and how Canadians are approved for mortgage loans for houses.

 

Rules for Insured Purchasers

Currently anyone who purchases a home with less than a 20% down payment is required to pay a one-time insurance fee to the bank. This fee is simply just reassurance to the bank, in the case that a mortgage payment cannot be made. However, under the new regulations, buyers will still have to pay the insurance fee, but they will also have to be pre-approved for a higher interest rate. This rate will be at least 2% higher than the initial mortgage rate that they negotiated. First time home buyers will need a higher amount for a down payment and prove they can attain that extra 2%.

 

Rules for Uninsured Purchases

Under the current rules anyone who purchases a house and puts a down payment of 20% or greater of the mortgage is not required to purchase insurance from a bank. However, with the new legislation, even those who hold a down payment of 20% or greater will be required to pass a “stress test,” now meaning they will have to qualify for a rate 2% greater than what they had initially negotiated.

 

Effects for Current Homeowners

Under the new regulations, current homeowners will be exempt from the stress test, but this is only if they choose to stay with their current institution. Implementation of this regulation means that when homeowners are eligible to renew their mortgage, current homeowners will be restricted from discovering new lower rates.

 

Effects for First Time Home Buyers

The changes to regulations have caused some changes in the real estate market. First time home buyers with 20%. This means that more homes are now being purchased a little more quickly than before and the new regulations will not affect these buyers. It can be difficult to plan, especially for first time buyers.

January Impact Report

January Impact Report

In January, Community Mortgage Movement agreed to be a sponsor for the Community Living London’s Night of Heroes. This night will be held on February 22, 2018 at the Convention Centre. This will be the third year that Community Mortgage Movement has sponsored the event. You can see a recap from the 24th annual Night of Heroes here.

 

This month I also attended a regular leadership development committee meeting at the London Community Foundation. This charity works with many leaders and advisors in the London area and to help ensure that the group remains in touch with the London community.

 

Another event that we agreed to sponsor is the “Night of Country in the Country”- in support of My Sisters Place. My Sisters Place aims to reduce homelessness for women and to support women to find and keep safe, affordable housing. At the same time, we connect women with CMHA Middlesex mental health services

 

Received a thank you from Pillar Non Profit for being a community sponsor for their 2017 Pillar Innovation Awards. The Pillar Community Innovation Awards celebrate nonprofits and charities and the individuals, businesses and government sector organizations who work with them to make our community brighter.

 

On Saturday, January 27, I attended an Ocean Wise Sustainable Seafood tasting menu at Growing Chefs it was awesome! For those unaware what Growing Chefs helps to unite chefs, educators, growers and the community. They help to get kids and communities excited about healthy and wholesome food. Since they teamed up with Ocean Wise, the event featured how Growing Chefs is committed to using local, sustainable food sources and talking about sustainable seafood in Canada.

 

With over one billion people depending on seafood as their primary source of protein. Choosing to eat Ocean Wise recommended sustainable seafood helps to relieve the pressure on over-fished species and ensures that we will be able to continue to enjoy seafood for generations to come.

 

Ocean Wise has set up a classification system, which  is based on two categories: Ocean Wise or Not Recommended, simply a good or bad choice for our oceans. Species are regularly updated or reclassified with the latest scientific information. Classifications, including changes to and Ocean Wise recommendations are provided regularly to Ocean Wise partners. Learn more about our recommendation policy or find a sustainable seafood option.