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Thursday, August 21, 2014

How to know the maximum mortgage you should carry

A recent article in the Globe & Mail notes a few items and calculations one could use in order to figure how much of a mortgage you or, in the article's case, you and your spouse should carry.

A mortgage broker, lender or bank telling you how much is one thing but making that decision for yourself depending on your own budget and lifestyle is the one to stick with.

See the full article for details:

How much mortgage should you and your spouse carry?

 

Let’s imagine a nice Canadian couple, Karen and Steven.

 

Their credit rating is good, their jobs steady, household income secure. They’re prime meat for banks hungry to sign them up for a new mortgage.

 

But when buying a home, how should Karen and Steven determine how much to borrow? How much house should they buy? We asked mortgage brokers for some advice.

 

1. An obvious one: Draw up a personal budget including the new mortgage payments


Banks generally don’t like the burden of a mortgage to exceed around 32 per cent of household income. But we all have our vices and vanities. That percentage may not fully reflect Karen and Steven’s lifestyle now or down the road, said Raj Babber, mortgage broker and president at the Canadian Lending Network in Toronto and president of the Independent Mortgage Brokers’ Association of Ontario.

 

“Are these the types of individuals who like to go out for dinner three times a week and ask for the reserve wine list?” They might be serious foodies.

 

So, “even though the banks, based on their ratios and insurer guidelines, might state that you’re able to qualify for a certain amount, you should always look at yourself personally and say, ‘This is how much I can afford to pay for a home [and] maintain my lifestyle,’” Mr. Babber said.

 

Those weekly, bi-weekly or monthly mortgage payments can also, of course, change with a variable-rate mortgage as interest rates change, a risk requiring some buffer. Or with fixed-rate mortgages, it could change at term’s end, necessitating a budgetary rethink, say, five years down the road.

 

Brokers note, though, that Karen and Steven may feel less sticker shock toward mortgage costs compared with older friends, since they’ll likely be used to paying the soaring rents seen throughout much of urban Canada.

 

Still, lifestyle choices need to be seriously factored in. “Are the mortgage payment, principal and interest and taxes, and insurance going to be somewhat in line with [expenses before]?” asked mortgage broker Mike Boyle of the Mortgage Group Inc. in Calgary. “You don’t want to take yourself out of a comfort level and be house poor.”


2. Reconsider the old maxim of first buying a small starter home

The dream of a bigger house in the ’burbs, although cheaper than an equivalent-sized property in town, may have all sorts of extraneous costs for many homebuyers.

 

“They should take a look at the entire situation. Some people like to get a bigger house and travel into work, not realizing that the cost of travel is going up,” Mr. Babber said. “The commute ends up being more of a nightmare.”

 

Yet, the flip side is that buying a larger house now could be a better option if a couple knows they will soon be graduating to a bigger house anyway. Everything from transportation costs to property tax should at least be considered. A $50,000 difference between two homes’ selling prices may not be much in the long run if a family is sure it will spend more years in the larger home, Mr. Babber said.

 

3. Don’t get carried away comparing rates

 

“I find banks and brokers have created this situation where purchasers are focused on rates to the exclusion of everything else. Every mortgage is so different from lender to lender,” said mortgage adviser Rebecca Awram with DLC Origin Mortgages in Vancouver.

 

She points in particular to collateral charges. Toronto-Dominion Bank, for instance, registers its mortgages as collateral mortgages, which the bank says allows more ease in taking out a line of credit from the house, yet the mortgage can’t be easily switched to another bank.

 

Other banks do this too when a line of credit is opened from a mortgage. That loan similarly becomes a collateral loan which can’t be transferred easily, not only because it’s a floating rate, but also because it’s a floating balance.

 

Transferring the loan requires paying title insurance and other fees, Ms. Awram explained. In contrast, a conventional mortgage can be transferred to another lender for no cost to the consumer at the end of the term.

 

“Because a collateral charge cannot be switched or transferred for free at the end of the term, a lot of lenders have noticed, not surprisingly, that the retention levels on these types of mortgages are much higher at the end of the term compared with traditional mortgages,” Ms. Awram said.

 

So whether homebuyers will want to set up a line of credit stemming from the mortgage, in order to do renovations later, for instance, is a factor to consider. That line of credit can limit the ability to transfer the mortgage to another bank.

 

4. Pre-payment options can make a world of difference


The ability to double-up payments or skip payments, or pay off the mortgage faster in large chunks, should greatly affect the choice of which mortgage to purchase.

 

Often preferences for paying down a mortgage faster vary with the individual. For instance, someone who is not paid a steady salary, but on a contract basis, may rely more heavily on using doubling-up mortgage payments whenever they may find themselves flush with money. It’s a highly personal preference, making the choice of various different pre-payment options crucially important.

 

“It’s a harder thing to advertise. It’s a harder thing to get across in a snappy one-liner or a cute catchphrase, whereas rates are so easily identified, understood and compared,” Ms. Awram said.

 

Full Article >

 

Tony Marchigiano | Mortgage Broker | tony@mawest.ca
Cell: 604 505 7109 | Fax: 604 909 4666

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Tuesday, August 19, 2014

Vancouver House: This One's Big!

Construction on Vancouver House will begin in the next four months and as it goes up, so, too, will the city’s cachet as one of those places worthy of world-class architecture.

 

We’ve all seen the renderings of the tower that appears to twist, and few dispute that Vancouver House is a thing of beauty. It’s also going up in a downtown location at Beach and Howe that needed a serious jolt of life, in a tight wedge of space darkened by a bridge off-ramp; a dead zone dominated by traffic and perilous for pedestrians.

 

Once finished, by 2018, Vancouver House will be the sort of sculptural building that lands in the pages of international architecture and design books.Sales of the 388 units began just three weeks ago, and the tower is already half-sold.

 

Developer Ian Gillespie believes sales are driven by the fact that the tower is unique, and has the lustre of being a Bjarke Ingels project. Since he hired Mr. Ingels for the job, the young Danish architect’s demand has soared. He and Mr. Gillespie already have other projects in the works.

 

“Every city needs to have some special moments that take your breath away, that say to you, ‘Okay, this is something unique. This is something beautiful,’” says Mr. Gillespie, the man behind Westbank Projects Corp. “And you can’t have too much of that, because then it’s not special. But you do need two or three or four special moments in a mature skyline, and Vancouver lacks that.”

 

The tower appears to defy gravity, a top-heavy shape that ascends from a triangular base. It will be more than 500 feet tall and yet its foundation only 6,000 square feet.

 

“The total floor plate above is about 13,000 square feet, so your building is twice as heavy up top,” says director of sales Jason Dolker. “It’s the reverse of the usual building that gets skinnier and skinnier as it goes up.”

 

It wasn’t a creation driven by ego, or the “edifice complex” that drives development in cities such as Dubai and elsewhere, insists Mr. Gillespie.

 

“This wasn’t some attempt at being extravagant or trying to shock people into some crazy form,” he says. “Instead, the form came out of the constraints.”

 

One of the minor constraints was a parcel of land adjacent to the project, which they couldn’t buy because someone else snapped it up first. It wasn’t crucial for the tower, but it would have made sense to belong to the project because of its proximity.

 

“We have no idea what they intend on doing with it, as it’s very limited in its development potential,” says Mr. Gillespie. “Keep in mind our site is more than 100,000 square feet and that site is only 8,000 square feet. All in all, it wasn’t something that was worth us chasing, so we just worked around it.”

 

Floors 47 to 57 of the tower are “the estates,” which means they are especially luxurious. The 58th and 59th floors are two-storey penthouses. The biggest penthouse, which has yet to sell, is priced at just below $20-million. The lower-level units start in the $300,000-plus range, with sizes ranging from studios to four-bedroom. As for sales, they’ve been swift due to a long reservation list of names the sales team is working its way through.

 

As part of its $4-million amenities contribution, Westbank is building a market-style area under the nearby Granville Street Bridge. The project includes stores, restaurants and office space and 95 market rental apartments.

 

The tower will be connected to Mr. Gillespie’s own, newly acquired utility company, called Creative Energy. It has long supplied heat to the downtown peninsula, and the goal is to convert from gas to low-carbon biofuels.

 

There’s also a public art component, with Rodney Graham’s spinning chandelier, located at market level. Over the course of the day, the chandelier will slowly descend and at 9 p.m. spin rapidly, then slowly ascend again.

 

Mr. Ingels, 39 – who was introduced to Mr. Gillespie by former city planning director Brent Toderian – has been directly involved in the design of the faucets, the copper backsplashes, the kitchen islands that are shaped like the building, an infinity pool, the lobby couch that resembles stacked sand bags, and floating mailboxes designed to encourage conversation between residents.

 

“There is a strong link between architecture and interiors, like some of the features in the architecture repeat in the interior design,” says Bjarke Ingels Group partner Thomas Christoffersen, who met with Mr. Gillespie in Vancouver this week. “We are doing a lot of customized items, such as built-in furniture.”

 

Like most major projects, it hasn’t been without its controversy. Eyebrows have been raised about marketing to global purchasers. An influx of foreign money, mostly from China, has helped push Vancouver home prices so high as to make affordability an ongoing issue for a city where the average household income is among the lowest for a major North American metropolis. Locals are tired of competing with offshore money for a share of the real estate pie. It’s typical for marketers to target overseas buyers, but for locals, it’s a sensitive topic.

 

Westbank began its official marketing launch with real estate agent events in Vancouver in April. The company, which has offices in Shanghai, Beijing and Hong Kong, then marketed the tower in Asia in June. It also marketed the project in New York, London and Beverly Hills.

 

When asked what he thinks of the unease with foreign ownership, Mr. Gillespie is forthright. “I think it is a very provincial attitude,” he says. “And Vancouver is one of only four cities in the world where 40 per cent of the population is born outside of Canada. The second thing I would say is that the foreign buyer is buying a unit that creates hundreds of construction jobs. That buyer closes on the unit, and then pays thousands and thousands of dollars a year in property taxes, and doesn’t use infrastructure that those property taxes pay for. If that’s the worst-case scenario, then maybe we have bigger problems.”

 

Of the units already sold at Vancouver House, 60 per cent are local buyers, according to Mr. Dolker. Of those, about half are end-users, or people who intend on living in the units as opposed to holding them as investments.

 

Mr. Gillespie says we also need to define the meaning of “foreign owner.”

 

“The majority [of units] will sell to local residents of Vancouver,” he says. “And I don’t know where the numbers will shake out, but 35 to 40 per cent will sell overseas. And at the end of the day, most of those people already are Canadian citizens. About 90 per cent of the buyers in Hong Kong already have Canadian citizenship. Is it foreign because they don’t carry a passport? What does foreign even mean? In today’s world, what do those concepts mean?”

 

As for the potential empty condo issue, Mr. Gillespie says that the number of empty condos typically shrinks as the residents settle in. Wealthy global purchasers are often transient.

 

“These buildings mature and as they mature, the ownership of the units gravitates to people who are owner/occupiers,” he says. “I could point out building after building that has been through the same pattern. Because what happens is, you are a buyer from Singapore, and you buy a unit in Vancouver, and why do you buy that unit? They never, ever buy just on speculation. They don’t buy to flip it. Those days are gone 10 or 20 years ago. Our market doesn’t go cyclical up and down. It’s a very steady market. They buy because they think it’s going to be a second home or because they have a child who will go to UBC, or because they are thinking of leaving Hong Kong because they are worried about air pollution. And the ones who don’t end up coming, it’s because their kid who they thought was going to UBC decides to be a rock star.

 

Instead, they end up renting the unit out.

 

“But in those years they are paying property taxes, and supporting the City of Vancouver. So in the whole scheme of things in a city that will continue to blossom over the next century, why worry about something like a building not being occupied in next three or four years?”


 

Full Article - The Globe and Mail 

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Thursday, August 14, 2014

Can You Love Your Mortgage? Here Are Nine Reasons Why You Can!

A recent article shares 9 reasons to love your mortgage. Yes, love your mortgage, believe it or not. Take a read to see if you agree or if you have any questions regarding their comments and suggestions.


Nine Reasons to Love Your Mortgage

In June, existing-home sales rose 2.6% from May to a seasonally adjusted annual rate of five million, according to the National Association of Realtors. As usual, a majority of buyers took out a mortgage. The hefty loan involved fundamentally alters the finances of these families -- and opens up some intriguing opportunities.

Recently bought a house? Here are nine ways to think about that debt you just took on.

 

1. It's your cheapest way to borrow.

I'm not crazy about carrying debt. But if you need to borrow, a mortgage is the way to go. The interest incurred is typically tax-deductible and the rate should be low, in part because the loan is secured by your home. If you have other debt, you probably could lower your borrowing costs by paying off those loans and instead carrying a larger mortgage.

 

2. It's a negative bond.

Got a $200,000 mortgage and $200,000 in bonds? One is costing you interest while the other is earning you interest, so arguably your net bond position is zero. In fact, the rate on your mortgage is likely higher than the yield on your bonds, so it might make sense to sell bonds to pay down your mortgage.

 

3. It leverages your entire financial life.

We all engage in mental accounting, thinking of our home and mortgage in a different bucket from, say, our brokerage account. But once we have that mortgage, it effectively leverages our financial life, allowing control of more assets than if we didn't have the loan.

Suppose you own a $400,000 home with a $300,000 mortgage. Your only other significant asset is $200,000 in stocks. In effect, what you have is a $600,000 real estate-and-stock portfolio, half of which is bought with borrowed money.

That leverage magnifies gains and exaggerates losses, in the same way you can magnify gains and losses in a brokerage account by buying on margin. But a mortgage is the safer way to borrow.

While a brokerage firm can force you to repay a margin loan if your investments plunge in value, your mortgage lender can't demand its money back if your home tumbles in price.

 

4. It's a backup source of emergency money.

If you've built up some home equity, consider setting up a home-equity line of credit. That way, if you suddenly get hit with large medical bills or house repairs, you can borrow against your home's value.

 

5. It makes inflation your friend.

Like other hard assets, real estate tends to hold its value when inflation picks up. Also got a mortgage? You could be doubly protected against inflation.

The payments on a fixed-rate mortgage stay the same even as inflation rises, which means you can repay the loan with dollars that are less valuable. Adjustable-rate mortgage borrowers don't benefit to the same degree, because their interest rate will likely rise with inflation, though there are typically caps on how much and how fast the rate on an ARM can climb.

 

6. It lets you profit from falling interest rates.

If you have a fixed-rate mortgage and rates rise, you can sit tight with your low-cost mortgage. But if rates fall, you can refinance at the lower rate. Indeed, with 30-year mortgages still available at less than 4�%, this remains a great time to refinance.

 

7. It's an effective way to build wealth.

Despite the recent property slump, many folks still say their home is the best investment they ever made. It isn't because homes have enjoyed great long-run price appreciation. Over the past 30 years, prices nationally are up 3.6% a year, as measured by the Freddie Mac House Price Index. That's barely ahead of the 2.8% inflation rate.

Instead, homes build wealth by forcing folks to save. With every monthly mortgage payment, you trim the loan's principal balance and eventually you should own a valuable asset free and clear.


8. It's your default investment.

If you're worried about today's lofty stock valuations and lowly bond yields, you could always pay down your mortgage instead. Suppose your mortgage is costing you 5%. That's the effective pretax rate of return you earn by making extra-principal payments.

 

9. Paying it off can drastically reduce your cost of living.

Indeed, making that last mortgage payment is often the signal that retirement is finally affordable. Want to retire early? You might make extra-principal payments, with a view to getting your mortgage paid off ahead of schedule.

 

 

Full Article Reference: The Wall Street Journal


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Thursday, August 14, 2014

Vancouver and Toronto Grapple with Tight Vacancy Rates

Condo investors account for less than one-fifth of those who own units in two of North America’s most expensive housing markets, according to survey results fromCanada Mortgage and Housing Corporation (CMHC).

 

But as Vancouver and Toronto grapple with tightvacancy rates and high homeownership costs, data released August 8 shows 6.9% of condo investors maintain vacant units.

 

The CMHC surveyed more than 42,000 households in Toronto and Vancouver, and found 82.9% of people who own a condo reside in it year-round. Meanwhile, 17.1% of owners are considered condo investors — people who possess both a primary residence and a secondary unit.

 

It’s the first time the CHMC conducted a survey of this nature. CMHC chief economist Bob Dugan said they wanted to narrow in on Vancouver and Toronto since those are the country’s two biggest condo markets.

 

“All these kinds of things gives you a sense of the skin the game that these investors have, what their intentions are with their unit and gives you insight into these particular investors,” he said.

 

What the CMHC survey did not include was figures on foreign investors.

 

Dugan said he hopes they can provide that information in the future, but he admitted the data is hard the collect.

The organization previously measured data in land registries and compared it to where the tax assessment was sent.

 

Dugan said the CMHC came up with an estimate of 4-5% foreign investors, but they were not confident about the data since investors could have gone through property managers or law firms to purchase their units.

 

The survey also found 8.4% of local condo investors anticipate selling off their secondary condo within two years, while 54.4% of Vancouver investors plan to hold on to their unit at least five more years.

 

The most striking difference between Vancouver and Toronto is how much investors expect their secondary unit to increase in value. 

 

In Toronto, more than half of investors (56.1%) anticipate the value of their secondary units to go up in the next year.

 

But in Vancouver, just 36.6% of condo investors expect to see an increase in their units’ values.

 

More than half (53.2%) of investors said they purchased their secondary condo unit to generaterental income.

While the vast majority of investors owned just one secondary unit, 15.7% owned two secondary units and 9.8% owned three or more units.

 

Received from BIV

 

torton@biv.com

@reporton

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Friday, August 8, 2014

Home buyers continue to slightly outpace sellers, but not by much

Home buyers continue to slightly outpace sellers, but not by much
VANCOUVER, B.C. – August 5, 2014 – The Greater Vancouver housing market continues to
see slightly elevated demand from home buyers, steady levels of supply from home sellers and
incremental gains in home values depending on the area and property type.
The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in
Greater Vancouver reached 3,061 on the Multiple Listing Service® (MLS®) in July 2014. This
represents a 3.9 per cent increase compared to the 2,946 sales recorded in July 2013, and a 10.1
per cent decline compared to the 3,406 sales in June 2014.
“This is the fourth consecutive month that the Greater Vancouver market has exceeded 3,000
sales,” Darcy McLeod, REBGV president-elect said. “Prior to this, our market had not surpassed
the 3,000 sale mark since June of 2011.”
Last month’s sales were 3.8 per cent above the 10-year sales average for July of 2,948.
The MLS® Home Price Index composite benchmark price for all residential properties in Metro
Vancouver* is currently $628,600. This represents a 4.4 per cent increase compared to July
2013.
“Today’s activity continues to put Metro Vancouver in the upper reaches of a balanced real
estate market,” McLeod said.
The sales-to-active-listings ratio currently sits at 19.6 per cent in Metro Vancouver. This ratio
has ranged between 18 and 20 per cent over the last four months.
New listings for detached, attached and apartment properties in Metro Vancouver totalled 4,925
in July. This represents a 1.5 per cent increase compared to the 4,854 new listings in July 2013
and a 7.8 per cent decline from the 5,339 new listings in June.
The total number of properties currently listed for sale on the MLS® system in Metro Vancouver
is 15,617, a six per cent decline compared to July 2013 and a 2.5 per cent decrease compared to
June 2014.
Sales of detached properties in July 2014 reached 1,322, an increase of 5.8 per cent from the
1,249 detached sales recorded in July 2013, and a 68 per cent increase from the 787 units sold inJuly 2012. The benchmark price for detached properties increased 6.5 per cent from July 2013 to
$980,500.
Sales of apartment properties reached 1,212 in July 2014, an increase of 0.2 per cent compared to
the 1,210 sales in July 2013, and a 30.7 per cent increase compared to the 927 sales in July 2012.
The benchmark price of an apartment property increased 2.2 per cent from July 2013 to
$376,500.
Attached property sales in July 2014 totalled 527, an 8.2 per cent increase compared to the 487
sales in July 2013, and a 37.2 per cent increase over the 384 attached properties sold in July
2012. The benchmark price of an attached unit increased 3.4 per cent between July 2013 and
2014 to $472,400.
-30-
* Areas covered by Real Estate Board of Greater Vancouver include: Whistler, Sunshine Coast, Squamish, West
Vancouver, North Vancouver, Vancouver, Burnaby, New Westminster, Richmond, Port Moody, Port Coquitlam,
Coquitlam, New Westminster, Pitt Meadows, Maple Ridge, and South Delta.
The real estate industry is a key economic driver in British Columbia. In 2013, 28,524 homes changed ownership in
the Board’s area, generating $1.84 billion in economic spin-off activity and 13,977 jobs. The total dollar value of
residential sales transacted through the MLS® system in Greater Vancouver totalled $22 billion in 2013. The Real
Estate Board of Greater Vancouver is an association representing more than 11,000 REALTORS® and their
companies. The Board provides a variety of member services, including the Multiple Listing Service®. For more
information on real estate, statistics, and buying or selling a home, contact a local REALTOR® or visit
www.rebgv.org

 

Full Article 

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Friday, August 8, 2014

Understanding Mortgage Penalties

If you're planning on taking out a longer term mortgage, especially if it's a fixed rate the odds are that you'll make some changes before the term has matured or expired. Changes such as increasing the amortization, porting your mortgage to a new home, adding a line of credit or refinancing to get a better rate. Some of which may result in being charged a prepayment penalty. To get advice about penalties, and which of these scenarios they might apply to, is crucial from the first meeting with your mortgage advisor. In the past penalties or prepayment amounts & calculations have been very hard to understand but they can result in 4 or 5 figures once calculated. Because of this the Department of Finance has asked banks and lenders to make them easier to understand and to calculate. Most banks now agree to a voluntary Code of Conduct that requires them to post plain English explanations of prepayment charge calculations.

According to a recent article in the Globe & Mail the following 10 questions would be very good ones to ask a mortgage advisor when discussing the best options for you regarding your home financing. They are:

1. Is your fixed-rate mortgage penalty based on posted rates, bond yields or discounted rates? 

The logic: Some lenders  including the Big Six banks base penalties on posted rates, which can drastically inflate your penalty. Other lenders use bond yields, which can also cost you a small fortune, depending on bond performance. A few are even bold enough to use posted rates when calculating simple three-month interest penalties.

2. If I break the mortgage and stay with you, will you forgive a percentage of my penalty or apply unused prepayment privileges, to reduce my penalty?

The logic: More lenders are doing this as competition grows. 

3. If not, can I make a prepayment a few weeks before breaking my mortgage to lower the balance used to calculate my penalty?
The logic: When determining a penalty, some lenders refuse to consider prepayments 30-90 days before you request discharge.

4. What term do you use to calculate the nearest comparison rate for an IRD penalty? 

The logic: Some lenders use a shorter term than the nearest term, which can significantly increase your prepayment costs.

5. Can I increase my mortgage without a penalty? 

The logic: This is important if you ever upgrade your home or need additional funds. 

6. If I sell my home and port my mortgage to a new property, how long can I take to close on that new property and still avoid a penalty?
The logic: Some lenders unreasonably require you to close your old and new home on the same day. 

7. If I break the mortgage early, do I have to pay reinvestment fees on top of the penalty, or pay back any cash incentives that I've received?
The logic: Other things equal, why pay a reinvestment fee on top of your penalty? The latter answer is usually yes.

8. Can I get out of my fixed mortgage early if I pay a penalty? 
The logic: Some low frills closed mortgages don't let you out before maturity no matter what unless you sell your home.

9. Do you charge IRD penalties on your variable-rate mortgage, as opposed to the standard three-month interest? 

The logic: Despite being highly unorthodox, a few lenders actually do this and it can cost you. 

10. How long will you honour your IRD penalty quote? 
The logic: This is relevant if you're trying to discharge a fixed-rate mortgage while rates are dropping. Falling rates can increase your IRD penalty.

Penalties are a realm where borrowers need knowledgeable advice. Sadly, many advisers are inexperienced with penalty calculations and give you a blank stare when you ask too many questions. (That's a good clue that you should deal with someone else.)

Fortunately, the Financial Consumer Agency of Canada is doing a noble job encouraging clarity with mortgage penalties. On March 5t it will go a step further by requiring banks to provide: annual information to help consumers calculate their penalty, written penalty statements upon request with clear calculation explanations, and access to exact prepayment penalty quotes by phone.
These initiatives will encourage fairer penalties and help homeowners minimize them, saving many individual Canadians thousands over time.
As always if you have any questions regarding this article or penalty calculations please feel free to give me a call.
 
Sincerely, 
Tony 

Tony Marchigiano1-155 Water Street
Mortgage BrokerVancouver, BC
 
cell: 604 505 7109
fax: 604 909 4666
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Friday, July 25, 2014

Can a Mortgage Be a Part of Your Investment Strategy?

With today's low interest rates it, sometimes makes sense to put the minimum down payment, say 20% in this case, and either invest the rest or keep the rest invested if you have additional funds. It's not hard to make a return higher than 2.5% to 3% although there may be a little risk. 

 

It also sometime makes sense to pull equity out of your home to invest. Of course there is definitely more risk here as you are borrowing to invest; but your borrowing at the lowest interest rates available. If considering an investment strategy like this always talk to at least two people; your mortgage advisor as well as a financial planner. Maybe even your accountant for that matter.

 

See the attached article I pulled from Canadian Mortgage Trends on this subject and their commentary on a recent survey below:

 


"For most home buyers, a mortgage is the only path to ownership. But a recent survey reveals that mortgages are also being used as a preferred investment strategy for wealthy Canadians.

The survey commissioned by Investors Group found that 67% of high-net-worth Canadians those with investable assets of $500,000 or more who have a mortgage could actually pay off their home in full if they so choose.


A full one-fifth of wealthy Canadians have mortgages, with an average size of $156,890.

There was a time when extinguishing one's debt was of paramount importance. This was particularly the case in the past where interest rates were higher and, for many, servicing debt precluded them from investing in future goals, whether that be retirement, education or the like,says Peter Veselinovich, vice-president of banking and mortgage operations at Investors Group.

Today that is not necessarily the case. Individuals may wish to retain current investments rather than triggering capital gains taxes. That means paying down the mortgage often isn't the best plan.

Other tax-efficient uses of mortgage debt include investing in income-producing assets such as real estate, as well as businesses or investments in the common term of the word effectively any asset that may yield a cash return, he said.

The low interest-rate environment requires only a modest return to service the debt incurred to acquire these assets, while the normal returns available to a prudent investor would be the icing on the cake, Veselinovich added. Mortgages provide access to lower-cost funds than many other lending facilities because they are seen by the lender as being fully secured, and have a built-in cushion (equity portion) in the event that the value changes over time.

Other interesting facts from the survey:

  • 32% of high-net-worth Canadians own additional commercial or residential properties

  • 42% have investment rental properties

  • More than one-quarter of wealthy Canadians (with mortgages) do not have plans to become mortgage-free before retirement"

 

Tony Marchigiano 1-155 Water Street

Mortgage Broker Vancouver, BC

tony@mawest.ca mawest.ca

cell: 604 505 7109

fax: 604 909 4666

 


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Friday, July 25, 2014

What is the wealthiest neighbourhood in Vancouver?

Vancouver is consistently rated as the most expensive city in which to live in Canada, which may make it surprising that only 20% of the top 25 wealthiest neighbourhoods in the country can be found in the Lower Mainland, according to Canadian Business.

 

 

The neighbourhoods were ranked in terms of average household net worth. The most expensive neighbourhood in Metro Vancouver is Shaughnessy Heights, which comes in at number 4 on the top 25 list. This neighbourhood runs along the west side of Granville from West 29th Avenue to West 39th. In this area, the average house will cost you over $3 million, the average household net worth is $12 million, and the average household income is $777,184.

The other Vancouver neighbourhoods that made the list were Kerrisdale, Kerrisdale Park, West Bay & Sandy Cove in West Vancouver and Shaughnessy Centre.

The top 3 wealthiest neighbourhoods in Canada are in Toronto. In the Bridle Path area, the average household net worth is a staggering $22.27 million, the average annual household income is $936,137 and the average house price will run you $2.24 million.

The full list can be found here.

 

Received from: BIV 

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Thursday, July 17, 2014

Mortgage rules may be tighter for the self-employed, but options remain

This was the title of a recent article in the Globe & Mail and is something I would agree with. Mortgage rules are getting tighter including ones for self employed people, however, there are still options as long as you have at least 10% down payment as well as the following things that the article details:

 

If you are self-employed, live in a rural area or don’t have the best credit, you may find it increasingly difficult to get a mortgage.

 

Yet while tighter lending rules are making it harder for some people get approved by a bank, going to a second or third-tier lender isn’t something everyone is comfortable with.

 

Real estate experts say if you are self-employed, traditional lenders like the big banks may still lend you the money – it may just come at a higher interest rate, require a bigger down payment and increased scrutiny.

 

Customized products for the growing number of people who are self-employed often come with a minimum 10 per cent down payment instead of the usual five per cent, while the typical five-year closed rate for most is higher than what many banks are offering, said John Andrew, a real estate expert with Queen’s University.

 

Your chances are also better if you can show income tax records dating back a few years that suggest a steady income.

 

“If you can show your income tax records and things like that going back 10 or 15 years, and your income is fairly steady or even better, rising, they’re still going to consider you to be self employed, but you’re going to be about as well off as you can possibly be,” Andrew said.

 

“You’ll never be as good as somebody with a non-self-employed job, which is kind of ironic because you can still lose your job, and that’s the complaint that a lot of self-employed people have. They could be doctors or dentists or lawyers and be making $400,000 and have been doing it for 20 years, but at the end of the day, they’re still consider to be self-employed, and there’s always this suspicion that doesn’t apply if you can show a pay stub from your employer.”

 

Jason Scott, a mortgage associate with the Mortgage Group in Edmonton, says some people who are self-employed may also have difficulty getting approved by a traditional lender because the tax breaks available to them may make their income look lower than it actually is.

 

“If they’re being tax efficient, they’re paying more for that mortgage but they’re saving a lot of money on income tax,” he said.

 

Bad credit history is trickier, although some alternative lenders will still consider backing you if you can explain what happened.

 

“It has to have a story. It has to (give me) some sense as to why you were bankrupt,” said Matthew Robinson, chief executive of W. A. Robinson Asset Management Ltd., which backs mortgages through its Pillar Financial Services division.

 

“What happened? Were you sick? Did you go a through a divorce? (I need) a story that makes sense, not just that you had bad credit because you don’t know how to pay credit cards.”

 

That may get you a higher interest rate, but those lenders argue the rate is justified because of the risk attached, and because of the extra work that goes into verifying information and working to understand the circumstances that led to the bad credit.

 

“Everybody thinks they deserve a 2.99 (per cent) mortgage. But at the end of the day, a 2.99 mortgage is zero risk. It’s the lowest end of the scale,” said Robinson, whose company works with self-employed people, rural properties and also provides bridge financing for construction projects.

 

“If there’s any work involved, if there’s any administration on a any level, the bank cannot afford to do a 2.99 mortgage. There’s not enough room.”

 

He suggests talking to a mortgage broker who will have relationships with various institutions and be able to steer you toward the best mortgage for your particular situation.

 

“Mortgages are becoming so complex, and there are so many options for people, they should actually be using a mortgage broker even if they think they’re best client in the world,” says Scott, who has also written a book to help homeowners titled, Approved! Mortgage Advice for All Stages of Life.

 

“It becomes a case of you don’t know what you don’t know. There are so many strings and such fine print on mortgages these days that it really does pay to use a broker.”

 

Whatever approach you take, experts say there is always room to negotiate – whether on the mortgage rate or on the quality of your documentation.

 

And you would also be wise to put any mortgage documents you get from alternative lenders in front of a lawyer to make sure you are comfortable with the terms.

 

Full Article >

 

 Tony Marchigiano | Mortgage Broker | tony@mawest.ca
Cell: 604 505 7109 | Fax: 604 909 4666
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Thursday, July 17, 2014

Vancouver home prices on the rise, to increase sharply by the end of the year: Royal LePage

Prices for all home types grew in 2014’s second quarter, according to Royal LePage’s house price survey released July 9, and these prices are expected to grow significantly by the end of 2014.

 

The biggest growth was seen in the average price of detached bungalows, which increased 5.2% to $1,107,290. Prices for two-storey homes increased 4.6% to $1,204,011.

 

Prices for standard condominiums stayed almost flat, increasing only 0.3% to an average of $491,984.

 

“Prices in Vancouver are up overall because of increased buying activity, due to continued low interest rates and a pent up demand leftover from a fairly slow start to 2014,” said Bill Binnie, broker and owner of Royal LePage North Shore.

 

“Sales are up this quarter due to more demand than we’ve seen in at least the past three years.”

 

Royal LePage forecasts Vancouver home price increases of 7.1% for the remainder of the year.

 

“The real estate environment is very stable right now, so the future of house prices depends a lot on interest rates. If the rates remain the same as they are currently, we can expect to see slow but steady price appreciation for the rest of the year,” Binnie said.

 

Inventory levels in the city are below the 10-year average, according to Chris Simmons, broker and owner of Royal LePage Westside.

 

“While there has been a steady supply of new housing being built over the last few years, the supply of listings has not increased markedly,” Simmons said.

 

Inventory levels are particularly low for detached bungalows, which is driving the prices higher. Condo inventories are continuously growing, keeping price increases lower.

 

Across Canada, home prices grew between 3.9% and 5.2% in 2014’s second quarter, with increases across all housing types. The national average price for detached bungalows grew 5.2% to $406,454. The price of two-storey homes increased 5.1% to $440,972 and standard condos increased 3.9% to $258,501. Royal LePage forecasts national average price growth of 5.1% for the year.

 

Full Article >

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Wednesday, July 9, 2014

Low Interest Rates Fuel Strong June Housing Starts

This was the title of a recent article in the Globe & Mail which discusses the fact that persistent low interest rates are fueling a escalation in housing permits/starts as well as sales of high end homes. Even after interest rates started climbing last summer and we were told it was the end of ultra low rates we're now back where we were last year with rates as low as 2.89% for a 5 year fixed mortgage term. It's been more than 6 years now of ultra low rates and every year economist have been predicting the rise.
 
See the full article below if interested:
 

B.C. court says the mortgage penalty class action against CIBC can proceed. The court “certified” the class action last week, meaning that the case can be heard and the evidence weighed.


According to Kieran Bridge, the plaintiff’s lead counsel in B.C., “the principal issue is whether mortgage language about prepayment penalties that was used by CIBC on mortgages entered into between 2005 and 2009 is so vague that it is void and unenforceable, so the penalties that were collected must be refunded to customers.

 

An alternative question, he says, “is whether the problems with the mortgage language limits any prepayment penalty to no more than three months’ interest on the amount prepaid.”


“Another significant issue is whether, even if the mortgage language is otherwise enforceable, the mathematical formula used by CIBC was improper and not permitted by the mortgage language, and led to overcharges that must be refunded.”


Particularly interesting is that the action claims that CIBC’s prepayment formula was “marked as being internally confidential.” That makes it sound like CIBC was trying to hide the formula from people, an allegation that CIBC would certainly deny, we suspect.


The next steps following a class action certification are generally the production of documents by both parties and the holding of examinations for discovery. Bridge adds that this ruling also enables parallel class actions in Ontario and Quebec to apply for certification.

 

This case has been going on since 2011. It all came about when lead plaintiff Erin Sherry broke her FirstLine mortgage early and got dinged with a $47,000+ penalty. CIBC, which owns FirstLine, later reduced the prepayment charge and Sherry further recouped the losses when she refinanced at Macquarie Financial at a lower interest rate. But that wasn’t enough for her to drop the case.

 

Here is the judgment if you’re interested. The allegations against CIBC have not been proven.


Full Article >

 

Tony Marchigiano | Mortgage Broker | tony@mawest.ca
Cell: 604 505 7109 | Fax: 604 909 4666


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Wednesday, July 9, 2014

REBGV June Stats

The Greater Vancouver housing market enters the summer season with home buyer activity on the rise.


The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver reached 3,406 on the Multiple Listing Service® (MLS®) in June 2014. This represents a 28.9 per cent increase compared to the 2,642 sales recorded in June 2013, and a 3.7 per cent increase compared to the 3,286 sales in May 2014.


Last month’s sales were 0.6 per cent above the 10-year sales average for June of 3,386.


“Competition amongst home buyers today is as strong as it’s been in the region since 2011,” Ray Harris, REBGV president said.


 The sales-to-active-listings ratio currently sits at 21.3 per cent in Greater Vancouver, which is the highest this measure has been since June 2011.


 “Over the last three years, we’ve seen changes in demand yet home prices at the regional level have remained relative stability,” Harris said. “While these numbers provide high level trends, it’s important to know that changes in prices always vary depending on neighbourhood and property type. Consult your local REALTOR® for information on trends in your area of choice.”


The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $628,200. This represents a 4.4 per cent increase compared to June 2013.


New listings for detached, attached and apartment properties in Greater Vancouver totalled 5,339 in June. This represents a 9.5 per cent increase compared to the 4,874 new listings in June 2013 and a 10.1 per cent decline from the 5,936 new listings in May. Last month’s new listing count was 2.6 per cent below the region’s 10-year new listing average for the month.


The total number of properties currently listed for sale on the MLS® system in Greater Vancouver is 16,011, a 7.4 per cent decline compared to June 2013 and a 0.4 per cent decrease compared to May 2014.


Sales of detached properties in June 2014 reached 1,462, an increase of 32.7 per cent from the 1,102 detached sales recorded in June 2013, and a 58.7 per cent increase from the 921 units sold in June 2012. The benchmark price for detached properties increased 6.2 per cent from June 2013 to $976,700.


Sales of apartment properties reached 1,308 in June 2014, an increase of 22.5 per cent compared to the 1,068 sales in June 2013, and a 27.5 per cent increase compared to the 1,026 sales in June 2012. The benchmark price of an apartment property increased 2.4 per cent from June 2013 to $378,000.


Attached property sales in June 2014 totalled 636, a 34.7 per cent increase compared to the 472 sales in June 2013, and a 53.3 per cent increase over the 415 attached properties sold in June 2012. The benchmark price of an attached unit increased 3.1 per cent between June 2013 and 2014 to $471,200.


Full Stats Package >


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Thursday, July 3, 2014

Consumers Are Increasingly Doing Business With Mortgage Brokers

A recent survey by CMHC (Canadian Mortgage Housing Corporation) has determined that consumers are increasingly using brokers to help them with their mortgage financing as reported by Canadian Mortgage Trends.

 

A portion of the article is attached below along with some of the benefits of working with a broker:

 

2014 CMHC Mortgage Consumer Survey

JUNE 18, 2014 ROBERT MCLISTER

 

CMHC’s Mortgage Consumer Survey is one of the best looks at mortgagor behaviour because, unlike most other industry surveys, it focuses only on recent borrowers.

 

And those recent borrowers are telling us something interesting. Despite fierce direct competition from lenders, consumers are increasingly doing business with brokers. Brokers have picked up market share in 3 out of 4 mortgage categories tracked by CMHC.

 

Here are some of the benefits of working with a mortgage broker:

 

-       Mortgage Brokers are specialists in ALL mortgage products. Our role is to act as a link between you and  

        the banks so that you do not have to spend your valuable time shopping around for the perfect mortgage.

 

-       Rather than working for one financial institution, brokers deal with many lenders all across Canada.

        Brokers can offer you more choices and more competitive rates.

 

-       Expert, unbiased and fast service is FREE!

 

-       They are not tied to any specific lending institution and yet the perfect lender for your mortgage

         reimburses us with a “finder’s fee.”

 

-       There are no broker costs hidden in your mortgage and lenders pay standard fees.

 

-       Every client is going to have different goals, dreams and plans. Some brokers specialize in making sure

         that your financing is going to facilitate your dreams.

 

-       Annual reviews to discuss and make plans to pay your mortgage off faster. 

 

-       Your broker can be your first stop for all mortgage inquiries and changes going forward, not the lender

         your mortgage is placed with. (Optional)

 

-       If your situation requires special attention, brokers have access to several equity and private lenders so

         that every client can find the financing they require.

 

 

Tony Marchigiano                          1-155 Water Street

Mortgage Broker                            Vancouver, BC

tony@mawest.ca                         mawest.ca

 

cell: 604 505 7109

fax: 604 909 4666

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Thursday, July 3, 2014

Vancouver real estate hot spots identified

 

Certain neighbourhoods in Vancouver are becoming real estate hot spots, with buyers in bidding wars sometimes paying significantly over asking the asking price to settle in their dream location.


According to Ray Harris at the Real Estate Board of Greater Vancouver, homes listed in Vancouver East are typically selling 15 days faster than those listed in other parts of the city.

 

The area, he says, is the hottest it's been for three years.

 

Realtor Lorne Goldman identifies the Main and Fraser neighbourhoods as the most popular right now, with demand significantly outstripping supply.

 

He says it's not unusual for sellers to receive nine or 10 offers.

 

"Frequently, there are offers with hundreds of thousands over the list price," he says. "Recently one sold — on a 33 foot lot — for $1.53 million. The prices are escalating promptly in that area."

 

Just a few blocks west, in the Cambie area, realtor Clair Rockel says June is typically a slower month, but that's not the case this year.  

 

She says the demand is coming from local buyers, who have wanted to live in these neighbourhoods for a long time.

 

"You have people approaching agents that are known to do a lot of business in certain neighbourhoods and they say, 'We need this and we are willing to pay a premium for that'," said Rockel.


"I saw it a few years ago, and I saw it before that in 2007...We have a market where the supply just cannot keep on with demand."

 

Full Article >

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Thursday, June 26, 2014

Canada`s Anti-Spam Legislation

Canada's new anti-spam law was passed in  December 2010 and, following a Governor in Council order, it will enter into force on July 1, 2014. Once the law is in force, it will help to protect  Canadians while ensuring that businesses can continue to compete in the global marketplace. On January 15, 2015, sections of the Act related to the unsolicited installation of computer programs or software come into force.

 

When the new law is in force, it will generally prohibit the:

 

  • - sending of commercial electronic messages without the recipient's consent (permission), including     messages to email addresses and social networking accounts, and text messages sent to a cell phone;
  • -alteration of transmission data in an electronic message which results in the message being delivered to a different destination without express consent;
  • -installation of computer programs without the express consent of the owner of the computer system or its agent, such as an authorized employee;
  • -use of false or misleading representations online in the promotion of products or services;
  • -collection of personal information through accessing a computer system in violation of federal law (e.g. the Criminal Code of Canada); and
  • -collection of electronic addresses by the use of computer programs or the use of such addresses, without permission (address harvesting).

There are three government agencies responsible for enforcement of the law. When the new law is in force, it will allow:

 

  • -The Canadian Radio-television and Telecommunications Commission (CRTC) to issue administrative monetary penalties for violations of the new anti-spam law.
  • -The Competition Bureau to seek administrative monetary penalties or criminal sanctions under the Competition Act.
  • -The Office of the Privacy Commissioner to exercise new powers under an amended Personal Information Protection and Electronic Documents Act.

It will also allow all three agencies to share information with the government of a foreign state if the information is relevant to an investigation or proceeding in respect of a contravention of the laws of a foreign state that is substantially similar to the conduct prohibited by this Canadian law.

 

The law will also allow individuals and organizations who are affected by an act or omission that is in contravention of the law to bring a private right of action in court against individuals and organizations whom they allege have violated the law. Once into force, the private right of action will allow an applicant to seek actual and statutory damages. Statutory damages may not be pursued if the person or organization against whom the contravention is alleged has entered into an undertaking or has been served with a Notice of Violation.

 

Before filing a lawsuit against an individual or organization, get legal advice. An individual or organization could be responsible for paying considerable legal fees incurred by the alleged violator if they file an improper claim or one that is not considered to have merit.

 

More Info >

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Thursday, June 26, 2014

Do Credit Unions Really Have Better Mortgage Rates? Sometimes.

A recent article in the Globe & Mail called "A cheaper, under-the-radar mortgage option: credit unions" talks about credit unions offering lower rates than other lenders including the big banks, however, in my opinion this is not always the case. This past fall I was putting the many of my clients with a local credit union as they were offering the best rate on the market with full mortgage prepayment options to pay off your mortgage faster. As a mortgage broker I'm able to shop the market to determine what's best for my clients depending on their individual circumstances and what is being offered in the market at that time.
 
There are definitely pros and cons to every lender including credit unions. Credit unions are sometimes more flexible around approval options and have access to 35 year amortizations still but a big thing to consider is that they are local so in many cases if you moved from one province to another you may not be able to take or "port" your mortgage to a property outside of the province they do business in. This could result in a hefty penalty if breaking your mortgage term before maturity.
 
Here's the full article if interested:
 

When you last shopped for a mortgage, did you consult with a credit union? If you’re like more than four out of five recent home buyers, you didn’t.

 

Most mortgage shoppers overlook credit unions (CUs) because they think the rates aren’t good enough, or CUs aren’t convenient enough, or that they’ll save more by consolidating banking at their bank. But credit unions are dead set on changing those perceptions, and they’re fuelling mortgage competition in the process.

 

We saw that competitive spirit in February when Meridian, the country’s fourth-largest credit union, became the first major financial institution in 2014 with a five-year fixed mortgage under 3 per cent. That first mover advantage paid off. “Our pipeline of mortgages is double what it was last year,” says Meridian chief member services officer Bill Whyte.

 

And just this month, Ontario’s DUCA Financial Services launched the lowest five-year fixed rate in the country through select mortgage brokers.

 

As we speak, the top 10 CUs are advertising five-year fixed rates that average 0.56 percentage points lower than the top 10 banks, according to RateSpy.com. That’s not including the profit sharing that some CUs pay mortgage customers. These “member dividends” can range up to $200-plus per year for every $100,000 of mortgage.

 

Of course, banks can and do offer “discretionary” rates below their advertised rates. But discretionary rates aren’t visible on the Internet, where four out of five consumers go to research mortgages. That benefits credit unions, to the extent they publish lower advertised rates.

 

Like credit unions, banks are also recognizing that low rates can sell themselves. Bank of Montreal’s much-publicized 2.99-per-cent promotions helped make it No. 1 among big banks in mortgage market share growth since 2012. And now we’re seeing other banks jump on that bandwagon, including Bank of Nova Scotia and Toronto-Dominion Bank, which both ran sub-3 per cent five-year fixed specials this spring.

 

But credit unions are going a little further to win mortgage share, and people are taking notice. In 2013, CU mortgage portfolios grew 58 per cent faster than the overall market. And they show no signs of letting up.

 

CUs kicked their mortgage campaigns into high gear last summer. And the market share growth chart at the bottom of this column shows it. Credit union analyst David McVay, of McVay and Associates, attributes that growth spurt largely to credit unions’ “aggressive pricing.”

 

But low rates aren’t their only edge. CUs also pitch that they are member owned, not owned by outside investors. They don’t have to pay dividends to 3rd-party shareholders, which lets them work on smaller margins and/or pay dividends to their customers instead.

 

Regulation is also an advantage. “Being provincially regulated, we have more mortgage options available to our members than the big banks,” Meridian’s Mr. Whyte says, “… and we’re appropriately leveraging that, albeit not cutting any corners.”

 

Those mortgage “advantages” vary widely by credit union, but can include higher borrowing limits on a home equity line of credit, 35-year amortizations for those putting down 20 per cent or more, 100 per cent financing and easier qualification rules for conventional variable-rate mortgages and terms less than five years.

 

But if credit unions are so great, why do they have a piddly 8 to 13 per cent of mortgage market share, depending on whose statistics you believe?

 

Awareness is a major challenge. CUs don’t have $200-million to $300-million a year to spend on marketing like the banks do. “I would suggest we haven’t got our story out there about how co-operative banking is an alternative to the banks … and the fact that we can do almost everything the banks can do,” Mr. Whyte says.

 

To counter that, CUs are increasingly running high-profile rate specials, some of which are being picked up by the media. They’re also doing a lot of joint marketing. Last year, for example, a group of Ontario credit unions got together to promote co-operative banking. They’ve never done that before, Mr. Whyte says.

 

One area where banks outclass most credit unions is mortgage funding, an area where credit unions are clearly not created equal. However, the larger CUs – Vancouver City Savings Credit Union, Coast Capital, Servus and Meridian – can compete with the big banks through their access to millions of dollars of cheap deposits, their main source of mortgage funding.

 

After deposits, the next cheapest way to fund mortgages is securitization – i.e., packing mortgages and selling them to investors. And CUs are securitizing like never before. In Ontario, for example, CU mortgage securitization grew 36.2 per cent last quarter, dramatically faster than the industry.

 

Compared to the big boys, smaller credit unions don’t have as much low-cost capital, so they’re often not as competitive on rates. But even there you can find exceptions, like Toronto’s Slovenia Credit Union and its 2.89-per-cent five-year fixed.

 

The Internet is the great equalizer for micro-credit unions like Slovenia. Whenever they have excess deposits to lend out, they can cheaply advertise ultra-low rates online to thousands of potential customers. “The Internet will help [credit unions] level the playing field with the big banks,” Mr. Whyte adds.

 

The Internet also makes it easier to attract new customers. Meridian, for example, is launching a new website next month that lets people join the credit union online, instead of driving to a branch.

 

Despite their co-operative spirit, however, CUs have an uphill battle to steal share from the dominant banks. Banks are ubiquitous and perceived safe, so people park most of their accounts with them. Moreover, consumers’ preference for one-stop financial shopping gives banks an edge in the mortgage game.

 

But mortgages are a big deal to CUs too. They account for about half of their revenue and roughly 60 per cent of the loans they make. Furthermore, mortgages give them a chance to cross-sell things such as credit cards, GICs and RRSPs.

 

So despite being around for 113 years, this is only the beginning for Canadian credit unions in the mortgage market. They’re going to battle to the bone for your mortgage, and the competition they incite will benefit all borrowers.

 

Full Article >

 


Tony Marchigiano

1-155 Water Street

Mortgage BrokerVancouver, BC

 

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Thursday, June 19, 2014

10 Tallest Buildings in Vancouver

Vancouver is known for its mountain views, but below these mountains stand some tall buildings.Centred in the downtown core, these buildings follow some strict guidelines to preserve YVR views, but that doesn’t mean you won’t feel pretty small surrounded by these skyscrapers.

 

Scroll through the list below, from shortest to tallest, to find out some fun facts about these massive towers. Watch for a bonus at the end!

 

10. Bentall 5: 550 Burrard St.
9. Park Place: 666 Burrard St.
8. Fairmont Pacific Rim: 1038 Canada Pl.
7. Royal Centre: 1055 West Georgia St.
6. The Melville: 1189 Melville St.
5. Harbour Centre: 555 West Hastings St.
4. Shaw Tower: 1067 West Cordova St.
3. One Wall Centre (aka Sheraton Vancouver Wall Centre): 1088 Burrard St.
2. The Private Residences at Hotel Georgia: 667 Homer St.
1. Shangri-la: 1128 West Georgia St.

 

Full Article and Slide Show >

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Thursday, June 19, 2014

Is your Mortgage registered as Residential or Collateral? Here are the pros & cons of both.

There has been some recent negative media attention lately around Collateral Mortgages. There are definitely pros and cons for both Collateral & Residential. What's the difference? Well it's in the way it's registered at land titles. A residential mortgage is a more traditional way of registering a mortgage.


Collateral mortgages have gained popularity over the last 20 years or so. There are lots of benefits to them. A home equity loan, which is registered as a collateral mortgage, gives you features and benefits such as the ability to split your mortgage balance between fixed and variable rates in order to hedge against the ups and downs of rates over the life of the mortgage.


It also allows you to have a line of credit built in for future borrowings. Some lenders and banks offer collateral and residential mortgages. Where some of the media attention has been focused lately is on the lenders and banks who only offer collateral mortgages like, as reported in a recent CBC news story, TD, ING Direct, National Bank and various credit unions.


The con getting the media attention is the fact that it is more difficult & expensive to switch your mortgage from one lender to another with a collateral mortgage.


The mortgage has to paid out completely and reregistered at land titles. Of course to do this will involve incurring legal fees and more paperwork. There are a couple lenders who will pay for those legal fees. 


My advice; ask your Mortgage Advisor in the early stages of the application process. Will my mortgage be a collateral or residential one? 


If you have any questions around this topic please don't hesitate to call me anytime to discuss or clarify. 


Sincerely, 
Tony


 Tony Marchigiano1-155 Water Street

 Mortgage BrokerVancouver, BC

 tony@mawest.camawest.ca

 cell: 604 505 7109

 fax: 604 909 4666


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Thursday, June 12, 2014

Are shorter amortizations always better? Not always.

A recent article in the Globe & Mail discusses 4 reasons why a longer amortization might be better. This goes against what most think, that is, that a shorter amortization is always the way to go. 
 
Take a look at the full article to find out who it might benefit and why…
 

For years we’ve been taught that shorter mortgage amortizations are better. Most people in the mortgage business don’t challenge this premise and certain lenders preach it as gospel.

 

Consider this recent statement by a bank spokesperson: “Choosing a shorter amortization is the most responsible approach to home financing. It’s something we have been encouraging our customers to consider for years, as it means becoming debt-free sooner.”

 

How wise is that advice? Do longer mortgage repayment periods truly cost you more, all things considered?

In some cases the answer is unequivocally no. Longer amortizations, which spread your payments over 30 or 35 years instead of the traditional 25, can cost you significantly more in mortgage interest. But consider these four scenarios where “longer” is actually better.

 

1.) You have other high interest debt


Extended amortizations – for example a 30-plus year repayment period – lower your mortgage payments, freeing up cash flow. That’s cash you can put to better uses.

 

Suppose you’re paying 3.5 per cent on a mortgage but have a car loan at 6 per cent or credit card debt at 18 per cent. Why on earth would you pay more than you had to on your mortgage?

 

2.) You have higher-yielding investments


Even if you’re debt free, a longer amortization can still make sense. The trick is, you must earn an after-tax return on your investments that’s higher than your mortgage rate.

 

For example, if you’ve got a 3.5 per cent mortgage but can earn 4.5 to 5 per cent on tax-sheltered investments (like those in a tax free savings account), a financially secure homeowner is often better off lengthening their amortization and directing the mortgage payment savings to those investments.

 

There’s a caveat of course. Investment returns are more risky than pre-paying a mortgage, which is essentially a guaranteed return. Therefore, you must be able to withstand – or wait out –potential investment losses. Assuming you don’t need to cash in the investments for 10 years or more, the odds are very good, historically speaking, that you’ll generate positive returns.

 

“I can live with [the assumption of] an expected 5 per cent nominal return on balanced investments over the long run,” says Moshe Milevsky, a finance professor at York University’s Schulich School of Business. He says that even the conservative Canada Pension Plan targets almost 4 per cent annual returns, after inflation.

 

3.) You expect low long-term mortgage rates


One of the most important concepts in finance is the “time value of money.” This is the idea that money in your hand today is worth more than the same amount of money in the future. That’s because you can invest money today to earn a return over time.

 

By definition, the time value of money holds that a 25-year amortized mortgage has the exact same present value (cost in today’s dollars) as one with a 35-year amortization, assuming equal interest rates.

 

Put another way, you’re no further ahead by choosing the shorter 25-year amortization, so long as:

 

a) You invest the payment savings of a longer amortization in something that earns you at least the same rate of return as the interest rate on the shorter amortized mortgage.

 

b) Your average mortgage rate in years 26 to 35 is roughly less than or equal to your average rate for the first 25 years. (Remember, with a 35-year amortization you’d still have 10 years of payments after year 25.)

 

4.) You think inflation will rise long-term


Time value of money also comes into play here. The higher the rate of inflation, the less your money is worth in the future.

 

“If you believe that inflation now is artificially low; if you believe that inflation can only go up, you want to borrow money for longer,” Mr. Milevsky says. “Inflation benefits the borrower.”

 

“If inflation spikes tomorrow you’re better off with a longer amortization,” he adds, because you’d be repaying your mortgage loan with “devalued dollars.”

 

Put another way, the smaller the difference between your mortgage rate and the rate of inflation, the less sense it makes to pay off your mortgage quicker (and the greater the benefit of a longer amortization).

 

A word of warning


A longer amortization means you pay less principal with every regular payment. In turn, you’ll have a bigger balance every time you renew the mortgage.

 

After 10 years, for example, a $200,000 mortgage at 3 per cent interest would leave you a:

  • - $137,235 balance if you chose a 25-year amortization
  • - $162,205 balance if you chose a 35-year amortization.

If today’s historically low rates rise by the time you renew, a longer amortization means you’ll pay more interest on a bigger balance. This is a key risk that your other investments would need to offset.

 

Where do you get a long amortization?


The standard amortization in Canada is 25 years. But if you have at least 20 per cent home equity, most lenders will offer you 30 years. A handful of lenders (e.g., Alterna Savings, B2B Bank, Coast Capital Savings, First Ontario, RMG Mortgages, Vancity) even have 35 year amortizations.

 

The free option


Shorter amortizations force homeowners to save more, which can aid the less disciplined among us.

 

But if you’re a well-qualified borrower, have a savings mentality and are eligible for a longer amortization, a 30– to 35-year amortization is one of the best free options you can get.

 

Remember that even with an extended amortization, you can easily make optional extra payments to replicate a shorter amortization. You can even automate those extra payments. Then, if an investment opportunity arises or you need extra cash for personal reasons, simply reduce your mortgage payments back to the minimum and divert the cash flow to a better use.

 

For the right borrower in the right circumstances, longer mortgage repayment periods can be a sound strategy.

“Borrowing money at cheap rates, to invest in long-term and more profitable projects makes perfect sense,” Mr. Milevsky says. “If it works for the biggest companies in the world, it can work for you…but beware of the risks.”

 

Full Article >

 

Tony Marchigiano | Mortgage Broker | tony@mawest.ca
Cell: 604 505 7109 | Fax: 604 909 4666
1 - 155 Water Street | mawest.ca

 

 

 

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Thursday, June 12, 2014

Vancouver aims to slow rate of heritage house demolitions

Applications to demolish and replace single-family houses in Vancouver have surged so much this year that city staff can’t keep up, even as the wheels of council grind toward a new heritage-protection policy.

 

The city’s general planning manager said there are 250 current applications for new single-family houses as he laid out policies Tuesday aimed at slowing down the rate of destruction for pre-1940 houses. In Vancouver, an application for a new single-family home almost always means the removal of an older one.

 

After months of mounting public anxiety about the rising numbers of character houses being torn down, manager Brian Jackson said Tuesday the numbers are scary.

 

Demolition statistics show that pre-1940 houses in Vancouver are significantly more likely to be torn down than newer ones, and most of the pre-1940 teardowns the last five years have been on the west side. Forty per cent of houses torn down since 2008 have been pre-1940 houses, even though those buildings only represented a quarter of the homes in the city.

 

“It really begins to tell a story that we’ve got a problem,” said Mr. Jackson, as he laid out the proposal for change that the Vision Vancouver council asked for last December. Councillors will vote on the measures Wednesday after hearing speakers.

 

Those proposals include some incentives, such as giving owners permission to add more space to their character house if they retain it. And there are disincentives, such as requiring anyone demolishing a pre-1940 house to ensure that 90 per cent of it is recycled.

 

Staff are also proposing a temporary moratorium on any demolitions in First Shaughnessy, the city’s original wealthy suburb created by the Canadian Pacific Railway in the early 1900s. Thirty-seven pre-1940 houses have been torn down there since 1982; 16 demolition applications have come to city hall just in the last year and a half.

 

Mr. Jackson said the city’s new building code, coming into effect July 1, also allows city staff to be more flexible about upgrades when homeowners are renovating older houses.

 

The suggested changes have produced a wide spectrum of responses.

 

Councillor Elizabeth Ball said many seniors in Dunbar and Kerrisdale, who are the biggest group of owners of the city’s character-house stock there, are being scared by real-estate people telling them the new protective measures will cause the price of their homes to fall because new owners won’t be able to redevelop.

 

“What is going to make it possible for the senior trying to maximize the value of their home?” she asked, even though her party, the Non-Partisan Association, has generally been critical of Vision Vancouver for not doing enough to protect the city’s older homes.

 

But people who have been mounting campaigns to save the city’s character houses say the policies, while at least a start to doing something about the problem, are too limited.

 

Marion Jamieson, who plans to bring her concerns to council Wednesday, said she’s afraid the new policies will just mean more demolitions in her neighbourhood, upper Kitsilano. That’s because many of the older houses there are from the 1940s and won’t be protected under the city’s cutoff date.

 

Elizabeth Murphy, a former city planner, said the new policy is weak and broad-brush, compared with the very detailed zoning bylaw that was put in place in west Kitsilano during the 1980s to save character houses there from demolition.

 

Ms. Murphy said the new requirement to recycle 90 per cent of a pre-1940 house, if the owner insists on demolishing it, is more of an inconvenience than a barrier. Mr. Jackson told councillors that recycling adds about 20 or 25 per cent to the normal $16,000 cost of demolition.

 

She also said the city needs to go back and look at some of the changes made in 2009 that led to the current demolition frenzy – changes that allowed laneway houses, higher houses and more basement space.

 

Full Article >

 

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