Blogs

Dated: March 21, 2023

If your mortgage is insured, which means most likely you put less than 20% down, you’re in the low-rate tier group.

If your mortgage is insurable, which means you put 20% down and got 25years amortization but the mortgage is back-end insured by the bank (hence you font pay a insurer premium), you’re in the medium tier group

If your mortgage is uninsured, which means you put 20% or more downpayment and got 30 yrs amortization, you’re in the high-rate tier group.

Dated: December 15, 2022

If your mortgage is insured, which means most likely you put less than 20% down, you’re in the low-rate tier group.

If your mortgage is insurable, which means you put 20% down and got 25years amortization but the mortgage is back-end insured by the bank (hence you font pay a insurer premium), you’re in the medium tier group

If your mortgage is uninsured, which means you put 20% or more downpayment and got 30 yrs amortization, you’re in the high-rate tier group.

Dated: December 15, 2022

Since the stress test was implemented, many buyers had to qualify at a higher rate for their purchase or refinance. However, homeowners do not know that there were grandfathering allowances included in the stress test announcement back in 2016.

Grandfather mortgages are mortgages that were done before October 17, 2016. Here’s some benefits for grandfather mortgages:

• No stress testing! - You will be able to re-qualify using the contract rate

• If the property is currently a rental, you may still be able to access insured rates.

• Amortization can be matched to your existing amortization up to a maximum of 30 years.

• Property value may exceed $1M.

• A sizeable advantage is If you have an existing mortgage + HELOC, you can combine both balances into one insurable mortgage, and re-amortize/qualify up to a 25 year amortization. 

• If your existing mortgage was originally arranged as a refinance, but was arranged prior to October 2016, insurable rates and extended amortizations can still apply.

• you cannot have refinanced your mortgage (e.g., increased the loan amount or extended the amortization) after fall 2016.

We can help you determine which category (insured, insurable, un-insurable) your mortgage falls in, and if you will qualify for grandfathering allowances, get in touch with us.

Dated: December 15, 2022

You can buy your first home without having to wait for years to save downpayment. Under borrowed downpayment programs offered by some of my lenders and insured by any of the 3 default mortgage insurers.

We can help you arrange downpayment through a combination of line of credits, personal loan and credit cards. Keep in mind, the income must be enough to service the payments of the personal loan, line of credits and credit cards on top of the property’s expenses.

There are some limitations including closing costs (0.50% to 1.50% of purchase price) must be from own savings, you should have a good credit and must be approved by the insurer.

Contact us now to disucss your mortgage options!

Dated: December 14, 2022

Buying in Holdco offers Limited Liability Protection, Tax Benefits and saving you money when passing on property to family. However, you need to know this before you put an offer under your RE Holding Coporation’s name:

·      Special rules for applying for a mortgage under a holding company.

·      Brand new holdco’s do require personal guarantee from owners of the HOLDCO

·      All shareowner’s personal income, debts and assets are taken into consideration to qualify

·      At one point, perhaps a signed NTR Financial Stmts may come in handy to get financing

·      It is not a surprise either that rental properties require higher downpayment vs. your owner-occupied home. However, some banks may require 25% to 35% down instead of the standard 20% down for rentals.

·      It cost more in terms of mortgage interest rate.

·      Lender pool shrinks to get financing where us as Mortgage Brokers, who have access to multiple banks, can help you get the right mortgage for your HOLDCO Purchases.

Dated: December 13, 2022

1. Income and Debts

If your debt ratios are the problem, there are two options for you: increase your income or reduce your debt. One way to increase your income may be with the assistance of a co-signer. By having someone co-sign for you, you may be able to include their income when calculating the debt service ratios. To reduce your monthly debt load, you could arrange a debt consolidation loan. Ask us or your banker if this may be an option for you.

2. Credit

Ensure that you always make at least the minimum payment on all of your bills. Every late payment that is recorded on your credit bureau report has a negative impact on your rating. If you need to rebuild your credit, bring us your Equifax report that you can get free from this link and we can review to assist you improve your credit history and scores. We have helped many homebuyers boost score by 100 points within as low as 1 month. An RRSP loan or a secured credit card is an easy way to start reestablishing your credit. Credit counseling services can also be of assistance when trying to repair or rebuild your credit.

3. Downpayment

A down payment is the amount of money that you pay at the time of purchase toward the price of your home. Your mortgage loan covers the rest. You should have a good idea of how much you can put toward the down payment before talking to a potential lender or mortgage broker. The minimum down payment is at least 5% of the purchase price on the 1st $500k purchase price, 10% downpayment on purchase price above $500k and anything above $1m requires 20% down. For example, to buy a home that costs $250,000, you will need a minimum of $12,500 as your down payment. However, to buy a $750k home, you will need $50k downpayment.

When you are ready to make an offer to buy a home, you will need to provide a deposit. The deposit forms part of your down payment, with the rest to be paid when you “close” the purchase of your new home. In some cases, the minimum down payment can be higher than 5%. For example, if you are self-employed or have a poor credit history, you may be required to provide a higher down payment.

4. Canada Mortgage Stress Test Rate

Canada’s Office of the Superintendent of Financial Institutions (OSFI) introduced a stress test on mortgage lending in 2016. The stress test requires that all borrowers be measured against the minimum qualifying rate which is either the Bank of Canada’s five-year benchmark rate or their contractual rate plus two percentage points; whichever is greater of the two. Current benchmark rate is 5.25% and let’s say bank offers you a 4.5% rate (also called contract rate, contract + 2 is 6.5%. Since 6.5% is higher than 5.25%, the bank will use payments based on a 6.5% rate to determine your debt ratios and eligibility. A lot of new home buyers get confused here. In reality, your payments will be calculated based on a 4.5% rate however, your income will be qualified using payments for the mortgage loan at a 6.5% rate.

In financial terms, a stress test is defined as a process by which a financial institution can determine the worstcase scenario for any investment. For mortgages, it means a stress test is used to determine the risks associated with each loan application. Lenders assess whether you would still be able to make the monthly mortgage payments should the rates increase upon the renewal of your term. Let’s say you get a mortgage with 25 years amortization, your rate of 4.5% is a 5 years rate, but what if after 5 years, you are renewing your mortgage, and market rates are 6.5%. This has recently happened for people who got a mortgage rate at 3% 5 years ago and when they’re renewing now, they are getting higher rates for the next term.

If you find that you are currently unable to qualify for the mortgage amount that you want, there are steps you can take to improve your situation and possibly increase the amount that you may qualify for. The first step is to identify the obstacles to approval and to pinpoint the areas that need improvement. From there, we can develop a plan to overcome those hurdles.

Contact us now to discuss your mortgage needs!

Dated: December 2, 2022

Nearly every borrower who got fixed payment VRM between May 2020 (those 0.99% rate times) and July 2022 now owe more in interest than their original monthly fixed payments. (Sourced from Desjardin)

As per Bank of Canada, “Of borrowers with a variable-rate, fixed-payment mortgage, we estimate that about 50%—or nearly 13% of all Canadian mortgages—have already reached their trigger rate.” (https://www.bankofcanada.ca/2022/11/staff-analytical-notes-2022-19/)

The above numbers do not include actual adjustable payment variable rate mortgages. This report released by Bank of Canada itself is actually a relief that the BOC realizes the effects of the rate hikes amongst homeowners.

What if we get a 0.25% increase on Dec 7, 2022?

Well, we do not have the exact prediction but the growth in the above numbers is going to be definitely exponential. Homeowners will be getting crushed (mostly already are). This is going to be a HUGE problem upon renewal given these fixed payment VRM holders have been paying interest only payments for the most part of their term. Btw, every major bank except Scotiabank, by default, offers fixed payment VRM option. You may get it adjustable by calling your bank’s 1800#s and requesting this to make sure your renewal goes smoothly. Otherwise, if balance if too high vs. property value or the amortization years are more than 25 years, you may get into a troublesome situation.

Many of my connections at banks are actually getting calls from borrowers that cannot afford to pay their monthly payments.

There is a silver lining here.

On emergency requests, if your mortgage is insured by Sagen (formally known as Genworth), you can extend amortization to 40 years to lower your payments. Sourced from article published on November 17, 2022: https://www.sagen.ca/wp-content/uploads/2022/11/BDL-EN_Sagen-Lender-Update-Supporting-Homeowners-Impacted-by-Rising-Interest-Rates.pdf?utm_campaign=MortgageLogic.news&utm_medium=email&utm_source=Revue%20newsletter.

However, CMHC and Canada Guaranty (other 2 mortgage insurers) have not released a competitive program as Sagen.

Now, you may be thinking how do I know who my mortgage insurer is?

First of all, if you put less than 20% downpayment when you bought home, your mortgage must have been insured. And Sagen’s mortgage insurance policy # is always a 10 digit # and starts with 2 or 9. Or you could simply call your bank’s 1800# to find out and see if extending amortization is an option for you.

The above option is not available for uninsured (or so called conventional) mortgages.

Remember that Bank of Canada, back in July 2020, said rates will be low for a long time.

LOL. Fast forward 2 years and we see the fastest paced interest rate hikes in 40 years! I truly feel sorry for homebuyers who took that advice and became homeowners choosing variable rate. This is where we, as Mortgage Brokers, need to assist homebuyers and investors make the right choice for their mortgage based on their financial budget and comfort level. Relying heavily on news and ignoring your personal financial situation is a road to brick wall, you will hard at one point and there will be damages.

That’s all I had on my mind to share with you. Comment your prediction with the rate hike on December 7, 2022 (if any)? As always, feel free to reach put if you have any questions about your mortgage needs!

Dated: December 9, 2022

On Wednesday Dec 7, 2022, Bank of Canada raised rates another 50 bps making mortgage prime rate 6.45%. This is 4% increase in 1 year!

This has been the fastest rate hike cycle since 1995!

In Canada, 2/3rd of homeowners has their primary home as their largest asset for retirement. When their primary home goes up in value, most homeowners nowadays refinance and cash out to spend.

Spending debts are all time high currently in Canada. And at this point, it is starting to bite.

Majority of mortgage payments from fixed-payment variable rate holders are only going towards interest only as they have hit the trigger rates.

I strongly believe Bank of Canada is done with raising rates. Bank of Canada in this meeting said We will be considering “whether” to raise interest rates further. In previous meetings this year, Bank of Canada said rates will go higher as we keep going to stop inflation.

We will find out in a few months how things go as I still laugh at fact when in July 2020 meeting, Bank of Canada said rates will stay low for a long time.

In the January of 2023, there’s a bunch of reports coming out including 2 inflation reports, employment report, GDP reports and a bunch of indexes. There will be more data and perhaps, we will see relief for homebuyers, homeowners and investors.