February 27, 2014
5 Facts About the RRSP Home Buyers Withdrawal Plan
It can be difficult for 1st time home buyers to come up with their first down payment on a home but as you may or may not know you can take the money out of your RRSP as a home buyers withdrawal. The money has to be in there for at least 90 days and has to be for a principal residence. Here are 5 other facts about the plan via Ratehub:
February 21, 2014
Interest Rates are Getting Even Better as we Approach the Spring Market
As we approach the spring housing market lending institutions are starting to get very competitive and rates have started to fall. Fixed rates, especially the most popular 5 year fixed, have been going down since the fall and may even get a bit lower. Discounts on variable rate mortgages have also increased making it a little easier to make that mortgage payment.
Here are the best rates we are offering here at Mortgage Alliance West:
1 & 3 year fixed are at 2.89%
2 year fixed is at 2.69%
4 year fixed is at 3.29%
5 year fixed is at 3.19%
5 year variable at Prime - .50% or 2.5%
Tony Marchigiano | 1-155 Water Street
Mortgage Broker | Vancouver, BC
cell: 604 505 7109
fax: 604 909 4666
February 14, 2014
Mortgage Changes from the 2014 Federal Budget
The Department of Finance recently came out with the 2014 federal budget. Within that budget was some mortgage changes. CMT (Canadian Mortgage Trends) discusses the good and bad of these changes in a recent article. The changes are mostly just within the industry itself but may eventually effect an individual borrower. There could also be future mortgage "rule" changes as well but mostly likely only if mortgage growth accelerates at a speed that the finance minister feels uncomfortable with.
Tony Marchigiano | 1-155 Water Street
Mortgage Broker | Vancouver, BC
cell: 604 505 7109
fax: 604 909 4666
February 6, 2014
Canadian Mortgage Trends Names Mortgage of the Year for 2013
Is there such a thing as a Mortgage of the Year? One might not think a mortgage would be something to celebrate or recognize. Maybe the paying one off! But mortgages are not all equal. They're really good ones and really bad ones.
For 2012 CMT (Canadian Mortgage Trends) named Coast Capital Savings "You're the Boss" mortgage of the year. For 2013 it was RMG Mortgages. RMG may not be a household name yet but with it's, still available, 35 year amortizations as well as excellent options to pay down your mortgage quickly it's definitely making headway.
January 30, 2014
What's Better: Contribute to Your RRSP or Pay Down Your Mortgage?
A recent article in the Globe & Mail asked the question: Should you contribute to your RRSP or pay down your mortgage? The answer depends on a number of things including what tax bracket you're in among other considerations. In some cases you might benefit from contributing to an RRSP. Others may benefit from paying down their mortgage, especially if you see yourself throwing a mortgage paid off party one day in the future!
Another idea, and one the article doesn't mention, is contributing to your RRSP and taking the tax refund and applying it towards your mortgage balance. That's where I come in; as a mortgage advisor I can look for a mortgage with excellent & flexible prepayment options or review them with you if your mortgage is already up and running.
Again, every person's situation is different so working together with a Mortgage Advisor as well as a Financial Planner to find out what's best for you is a great idea.
January 24, 2014
The Bank of Canada Rate Decision
The Bank of Canada left the Prime lending rate the same, once again, at 1%. It has now become more dovish and said there is just as much of a chance of a rate cut as a rate increase. This is good for us borrowers, especially those in variable rate mortgages or people thinking of taking a variable rate term. They also stated that it will most likely be 2 years before they start increasing the Prime Lending Rate.
The reason for their decision is low inflation and even a small chance of deflation.
Here's an article from Canadian Mortgage Trends recapping their decision:
January 16, 2014
A Surprising Poll from BMO for Amortization
BMO recently completed a poll asking people what their knowledge of the term amortization was. Over half (52%) were not even somewhat familiar with the word. Not to say that people aren't familiar with the concept of amortization. Amortization is, of course, the life of a mortgage. Understanding the concept is important but learning the ways to minimize the amortization is even more important. Your mortgage advisor should be defining the word, concept and the multiple ways to minimize amortization as well as recognizing the mortgage offers out there that restrict your ability to do so.
January 10, 2014
Does the fact that lifespans are longer help you out as far as mortgage debt?
In a recent article in the Globe & Mail it suggested that time is on your side; meaning because lifespans are longer you may have less financial stress even when it comes to mortgage debt. People are living to 90 and pass.The writer proposes that there is not as great a need to figure out what your going to do career wise in your teens, to maybe take 4 classes a semester and work at the same time taking 5 years to get a degree in order to come out of school with less debt. Even if you buy your first home in your 40's you could be paid off in 22 years or less. By paying on a bi weekly accelerated basis you'll bring a 25 year amortization down to 22 years. And, I also advise my clients to contribute to your RRSP, if you can and it makes financial sense, than take the tax refund and make a lump sum payment annually to your mortgage. This will reduce the life of your debt substantially.
Here's the full article with a life expectancy tool by Sunlife included:
January 3, 2014
10 Wild Ways to Save for a Home
There are many ways to go about getting your a down payment for your home and I'm happy to advise people on some. that one might not be aware of. The ways included in this article I found on cashcowcouple.com are about as creative and, well, wild as they get.
Take a read of the full article below for these 10 wild ways:
December 19, 2013
Do Early Mortgage Renewals Save or Cost You Money?
In a recent article in the Globe & Mail, which makes some valid points and good advice, it doesn't always pay to renew early with your current mortgage lender; especially if the rate they're offering is not that competitive. Some lenders & banks won't even let you hold the rate they're offering for an early renewal. They'll say either take it or risk the chance of that rate not being here tomorrow. Of course, the only time you would really need to worry about that is if we're in an environment where rates are going up rapidly.
December 13, 2013
Three Debt Truths You Need To Know
A recent article on Ratemarket.ca talks about the ways one can get into trouble with credit. It also includes some information that may be surprising to some people who are, well, surprised, at how low their credit score is. One thing the article states is that you if you have a credit score of less than 720 it will result in higher mortgage rates. While this may be possible it is different from lender to lender. I find somewhere between 650 to 680 is the point where you may not be able to borrow quite as much but still, in most cases, have access to the same low rates that are on the market. I would advise, though to strive for a credit score in the 700 or 800's. The top score is 900 although I've never seen anyone this high.
The article also gives some good advice on how to get out of debt.
December 6, 2013
A Tip for Better Mortgage Comparisons
This comparison typically entails running hypothetical amortization schedules on each mortgage and then comparing the total payments and ending balances.
Doing this gives you a close enough idea of the relative borrowing cost difference, but there’s an extra step if you prefer to be more precise.
“It’s very important when you’re comparing mortgage terms to compare cash flows,” says York University Professor Moshe A. Milevsky. “In almost no other comparison in personal finance do you have to worry about that, but with mortgages you do.”
When comparing the true cost of two mortgages, you need to calculate the present value of each mortgage’s payments, fees and balance at maturity.
If the monthly payments differ—suppose you’re comparing a lower rate to a higher rate—then you must make an assumption on the return that the borrower could earn if he/she invested that payment difference elsewhere. (Of course, whether the borrower actually invests that payment savings is another matter.)
To sidestep these intricacies, one can make one very simple assumption: that the borrower will always make the higher of the two mortgage payments being compared.
Here’s a simple example showing monthly payments for two hypothetical mortgages (a variable and a fixed):
To avoid the complexities of “discounting” cash flows, we simply equalize the payments.
In other words, we assume the borrower would pay:
Making extra payments on a mortgage often makes good sense regardless. And let’s face it, if you’re comparing a higher payment mortgage to a low payment mortgage, you have to be prepared to make that higher payment anyway.
The challenge is that few mortgage calculators make it easy to equalize payments, especially when you assume that rates will change during the mortgage term. Mortgage professionals have internal calculators that can do it, along with comparing different term lengths and making detailed rate assumptions. But we’ve yet to see a similar online tool for consumers. For this reason, our operatives at RateSpy.com have created one. Here’s the mortgage calculator link if you want to check it out.
November 20, 2013
I.D.E.A.S for Choosing Between a Fixed and Variable Rate
I ran across this interesting and very helpful article by Canadian Mortgage Trends this week pertaining to the age old question; should you go fixed or variable on a mortgage rate. The article is a couple years old but is still valuable for making this decision. I think it's a good read now just because variable rate mortgages have got a little more attractive over the past few months since fixed rates started to go up and the discounts available on variable mortgages got a little better.
Here's the full article:
The first question people often ask when deciding between a fixed and variable mortgage is: “Where do you see rates going?”
They assume we as mortgage planners know…and of course we don’t. No one does.
We can, and do, present a variety of possible rate scenarios based on:
But you never know for sure where the rate setters (the Bank of Canada and bond traders) will take the market.
Aside from reading the tea leaves on rates, the best thing a borrower can do is measure his/her ability to handle rising payments. To gauge that, we use a handy acronym called IDEAS.
IDEAS stands for Income, Debt, Equity, Assets,Sensitivity to Risk.
If most, or all, of the answers to the above are affirmative, a variable rate is something the homeowner can entertain.
After evaluating someone against the IDEAS measure, we then discuss (among other things):
For most people, the decision between fixed and variable will either save them thousands or cost them thousands. The goal is to try and take as much of the gamble out of the equation as possible.
Tony Marchigiano1-155 Water Street
Mortgage BrokerVancouver, BC
cell: 604 505 7109
fax: 604 909 4666
November 15, 2013
Is The Best Mortgage Rate Equal to The Lowest Rate?
A recent article by Canadian Mortgage Trends explains why the Best Mortgage Rate is not always synonymous with the lowest rate. Take a read to find out why. It could save you thousands of dollars down the road.
What is the Best Mortgage Rate?
It’s not synonymous with the “lowest mortgage rate.”
The best mortgage rate corresponds to the mortgage and advice that saves (and in some cases makes) you the most amount of money long-term.
Mortgage professionals routinely advise, “It’s not all about the rate.” To some, that sounds like evil sales-speak meant to boost commissions. The reality is that mortgage flexibility, contract restrictions and advice all have a definitive impact on borrowing costs. And most people don’t discover how much impact until after their mortgage closes.
That said, consumers are obliged to negotiate the very best deal they can. Three years ago, we asked ourselves, what kind of mortgage comparison website would we want if we were shopping for a mortgage ourselves? We thought up RateSpy.com.
Now, why on earth would someone need access to 3,000 mortgage rates and 300+ lenders, you ask? It boils down to probability.
At any given time, different mortgage providers are motivated to offer more heavily discounted rates. They may have:
By definition, the more lenders and brokers one has to compare, the higher the probability of finding a lender motivated to discount below the market.
Of course, once you find a low-rate provider, that doesn’t mean its rate entails the lowest borrowing costs. Asking the right questions is mandatory to ensure the mortgage balances renewal risk with interest savings, and lets you make changes down the road—penalty free. This mortgage rate & features checklist can serve as a guide in that respect.
For these reasons, the interest rate alone can be a misleading number. If your lender or mortgage broker is quoting you a rate 10-15 basis points higher than what you’ve found online, it means nothing until you compare the features, restrictions and speed/quality of service from both providers
Mortgage shoppers are, and will continue, flocking to rate comparison websites. But the information on these sites is vastly inadequate at the moment. Why, for example, don’t rate comparison sites speak to the penalty facing consumers if they break the mortgage early? Variations in penalty calculations can, and do, cost borrowers thousands more than small rate differences.
We have a responsibility to help consumers find the best overall deal, not just the best rate. The best deal factors in things like term selection, penalty cost, refinance restrictions, porting flexibility, advice on properly structuring an application, advice on building equity and so on.
Every Canadian rate comparison site I’ve seen underperforms in these areas. Even ours...for now. Our mission is to address these information deficiencies so consumers can identify the right combination of rate savings, flexibility and advice in an objective forum with no sales pressure.
Thereafter, we have to make it easier for folks to find competent mortgage professionals for a second opinion. Think about it. If you don’t have a trusted referral, where do you look to find a great broker or banker? How do you know the person you’re calling has the tenure, experience, qualifications and competitiveness to serve you best? Most existing advisor directories help you screen by little more than company, province or city.
Expect mortgage comparison sites to significantly evolve along these lines in 2014.
November 8, 2013
What Makes Good Mortgage Financing?
November 1, 2013
Buyer's Remorse for Mortgages?
Have you ever had a sick feeling in your stomach after buying a car, or a big screen TV, or a boat, or expensive jewelry? It’s that nagging worry that you’ve bought the wrong model or spent more than you should have.
Buyer’s remorse is common with big ticket purchases, but it’s not as common right after you close a mortgage.
With mortgages, the buyer’s remorse comes later—when you discover the cost of changing your mortgage, or realize that you have no objective source of advice to rely on.
There are numerous ways to weed out inferior mortgages, and (believe me) there are countless inferior mortgages out there. Once you’ve scouted out the best rates, it’s time to start asking questions. Or, better yet, time for your Mortgage Professional to advise you on the features and benefits, or lack thereof, of each mortgage or rate you're considering.
As always, if you have any questions or want to review your current mortgage give me a call or send me an email.
October 24, 2013
Bank of Canada Finally Drops Hint at the Prime Rate Going Up
At the Bank of Canada's (B of C) last meeting they finally dropped the hint that the Prime rate will be going up. This is something they've been warning and hinting at for the last 18 months and actually prior to that. There is just as much chance as a rate drop now. This makes the variable rate mortgage a little more attractive as Prime rate affects variable rate loans and mortgages.
Here's the full article from Canadian Mortgage Trends:
October 18, 2013
Could Interest Rates Be Falling?
The shutdown in the U.S. Government has been a welcome occurrence for Canadians looking to buy a home or refinance their existing mortgage. It has caused investors to move from U.S bonds to Canadian bonds which lower bond returns and subsequently, mortgage interest rates.
Timing is important and right now might be the best time for people to buy or definitely have a good look at their current mortgage.
October 11, 2013
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 to make them easier to understand and to calculate. Most banks & lenders 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. By March 5 of next year, 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.
October 2, 2013
How Will Rate Hikes Effect The Housing Market?
This is the million dollar question. If rates are gradual, which is the current forecast then it could be ok as incomes are set to rise by 3 to 4% as well. You should, however, look at doing a stress test on your mortgage payment right from the beginning when you're getting pre approved. That's just taking a look at what your mortgage payment would look like if you were at the current 5 year posted rate of 5.34%. Right now the forecast by the attached TD Research report states rates will be around this much or more by 2017 which is still 3 years away.
For the full article see below...
Rate Hikes and Housing: TD Research
In just a few short months, long-term mortgage rates have burst higher by almost ¾ of a percentage point.
People naturally want to know if the hikes are sustainable, and how they’ll affect the overall housing market.
TD Economics weighed in on these points in a report last week. Here’s a quick overview of the implications TD foresees, and some observations of our own…
(Source: TD Economics)