Why you should consider buying now and getting ahead of the market correction:

Rates are going up. Fast. Why?

5 year fixed rates are up about 1.25% since last year this time.

The Federal Government. They have taken steps in attempt to regulate our housing market in the last few years. Toronto and Vancouver housing markets have grown beyond economic norms due to a variety of factors. The government began its steps to manage this by implementing new mortgage guidelines and rules nation-wide. Many of these are direct to the consumer, such as the benchmark qualifying rules, restrictions on rental and investment mortgages, and foreign investor restrictions/taxes. In addition, there have been new rules that are indirect to the consumer, and unfortunately not as publicized. Intense OSFI regulations have affected all lenders, including the major banks, monoline lenders, trust companies, credit unions and private lenders. Perhaps most notable, is the drastically increased capital reserve requirements for mortgage lenders. The government mandated a 3 year time window for mortgage lenders to fund these capital reserve requirements. Much of this is being funded by increased mortgage rates for the consumer. In addition, there have been regulations implemented regarding back-end insurance for conventional borrowers. The cost for this is also funded by the consumer in the form of higher interest rates.

Canadian Bond Yields. Bond yields determine the discounted 5 year fixed rate. They have been trending upwards, especially in the last 18 months.

US Economics. (Aside from social political views of course) the Trump administration has grown the US economy, and they are incurring the longest expansion in US history. Basic economics will tell us that a recession is due soon. When that occurs, it will likely drive our interest rates downward. Timing for this is difficult to predict, and I am by no means an economist.

Most Canadian Economists predict that 5 year fixed rates will rise another 0.5% by this spring, and another 0.50% through 2019. Mortgage holders and prospective buyers should expect rates to be around 5% in the next 2 years, at which point we predict a further stagnation in the market and then rates dropping again.

Why Should I buy now, with all off this market correction business going on? I’m waiting for prices to drop.

Now is an opportunity to get ahead of the housing market with a 5 year fixed rate.
For example:

If monthly payment is your concern:

• Buy a home at $400,000 today with 5% down @ 3.69% and your payment will be $2012.96
• If you wait for a year, and rates are 4.69% and you want to have that same payment, you’ll have to buy a house for $361,000. You would be looking at a monthly payment of $2229.26 on a $400,000 purchase
• This is a huge range in the Calgary market. Depending on the area you’re looking at, this can be the difference between condo or freehold, or attached or detached. Housing prices are not going to drop that quickly, these things take time. Also, if you work with us on a pre-approval, we can hold your rate for 120 days while you shop.

If longer term interest savings is your concern:

• Buy a home today at $400,00 with 5% down. 3.69% and monthly payment at $2012.96
• After 5 years your principle paydown will be $53,045.00
• Buy a home next year at $400,000 with 5% down. 4.69% and monthly payment at $2229.26
• After 5 years your principle paydown less payment differential will be: $34,168.00
• That’s $18,877.00

If qualifying is your concern:

• If your annual household income is $92,000 today, you would qualify for the above loan scenario ($400,000 with 5% down) assuming you have good credit and do not have excessive loans/debts.
• If rates are 1% higher next year, with 5% down, you would only qualify to buy at $366,000.

Whatever your scenario may be, you can feel free to call me for mortgage advice.

Pot is Legal: Now What?

As we all know, recreational marijuana is now legal in Canada. The law is set, but implementation and how policies and guidelines will impact our industry are yet to be determined. Generally, 30 grams for personal possession, basically an ounce baggie for those who might relate and up to 4 plants at home.

For realtors, mortgage brokers and their clients we are facing many months of the lenders sorting out their guidelines. If a borrower or seller voluntarily discloses they have been growing four legal marijuana plants, which should produce more than 30 grams, as a point of interest, how will the lenders, mortgage insurers and home insurers react?

Lenders:

As of today, many lenders do not have a policy. Some say yes four plants will be OK, some say case by case, and some say four plants will be a hard no. For the common existing house stigmatized as a “grow-op”, there are still very few lender options. We do have a couple of lenders for fully remediated grow-ops, and CMHC does consider those applications.  

Mortgage Insurers:

CMHC says they will carry on the same as they have been. Genworth and Canada Guaranty are saying either, case by case or the policy will be determined shortly.

Home Insurers:

As or right now we have not been able to get any consistent information on this subject. However, home buyers and homeowners are encouraged to check with their provider for their policy information.

For those folks growing up to four plants and looking for financing, expect your clients to get mixed results from banks and many lenders. Some lenders are considering air quality tests, home inspections, statutory declarations and other means to determine if the home has been impacted or damaged by four plants. For now, we have identified willing lenders. CMHC will consider the applications.

Please contact me if your clients have any questions on how the new legalization laws affect their options or to avoid complications with four plant files.  

Written by Croft Axsen, Broker Owner DLC Jencor Mortgage

By Karen Penner and Heather Hellings

Welcome to Canada!

Canada is made up of hundreds of thousands of people and some did not start in Canada but have made it their home. Buying a home, especially when you are new to Canada can be mind boggling, BUT, we have a mortgage for you!

The New to Canada Program is designed to help new Canadians purchase their first home sooner and become established faster.

What are the qualifications for this program?

Firstly, you must have immigrated or relocated to Canada within the last 3 to 5 years to qualify for the New to Canada Program.  You must have proof that you have been working full time in Canada for at least 3 months and that you are not on probation with your employer. The lender will require a letter of employment from your employer with your salary and employment status. Copies of your valid work permit or landed immigrant status card (front and back) will also be a requirement.

Down payment is a minimum of 5% and at least 5% of the funds must come from your own savings and be verifiable with 3 months worth of bank statements from a Canadian Bank.  Some lenders will allow the 5% to be a gift from an immediate family member and gift letter from the lender will be required.  Please speak to your broker in advance when a gift is being used. That way we can provide you with information for monies coming from other countries and ensuring you are following all the banking rules and regulations.  With a minimum of 5% down payment you will need default insurance and that can be provided by Canada Guaranty, Genworth or CMHC (Canada Mortgage and Housing).  Each of these insurers offer programs that will work with the lender.

The lender will need to see your credit bureau and as you are new to Canada you may be just starting that, so we will require an international credit report from your country of origin.  Just starting up your credit, we can assist you with that by providing valuable information to get you ready for the road to homeownership. You can obtain an International or US Bureau by contacting Equifax and they will point you in the right direction.  Your international credit report is taken into consideration by the lender as it will show that you are a responsible borrower and have kept your accounts in good standing.  We would advise that a letter of recommendation from your current bank be done as that is also very helpful in the process. If you cannot provide an international credit bureau the lender will ask you for to confirm your good standing by providing 12 months history of bills that must be paid on time (rent, utilities, cable or insurance premiums).

Working with your Jencor Mortgage Advisor will provide you with options and answers to your questions. Our advice is always free, we are here to help you make home ownership a reality.

Remember, when looking for your home, use a professional to assist with not just financing but the search as well.  Realtors are great negotiators and can also help you determine your requirements in a home, “needs vs wants”.  Do you need to be close to schools, public transportation, etc.

This process can take some time but again, that is why you have a Jencor Mortgage Advisor at your fingertips!

By the way, Welcome to Canada!!

Original Post: https://www.jencormortgage.com/blogs/mortgage-blog-canada/209527-new-to-canada#.W5q0Cs5KjIU

Reason #10 To Use a Mortgage Broker: Money

Everyone always wants the best interest rate, that’s a given, and yes, often a mortgage broker can actually get you a better rate from your very own bank than you can. Mortgage brokers also have access to a very large pool of lenders that cannot be accessed by the general public. Many of these are smaller, otherwise known as Monoline Lenders, who often offer bulk discounts on mortgage products and offer rock bottom rates. interest rates are changing on a daily basis. We are always up to date with the rates and terms each lending institution is offering.

Aside from rate, there are many other factors to consider when choosing a mortgage. Payout penalties, for example, can be a huge cost if you terminate your mortgage before the term is up. It is important to understand how your mortgage lender calculates the penalty. A mortgage broker can save client ten’s of thousands of dollars over the term, just by placing the mortgage with a lender who has a more lenient penalty, or into a mortgage term that has a lesser penalty.

Utilizing pre-payment privileges can also be an integral part of the overall mortgage planning. A good mortgage broker will help you strategize this and have you mortgage paid off as quickly as possible.

The various insurer programs like the Purchase-Plus-Improvements and the CMHC Green program can save buyers a ton of money by creating the opportunity to capitalize improvements and renovations into the low-rate mortgage, rather than carrying the cost on a much higher rate credit card or line of credit.

Don’t leave money on the table- make sure you call a trusted mortgage advisor for a free mortgage consultation before you sign with your bank.

As Always, let me know if you have any questions or concerns.

Sarah

Reason #9 To Consult a Mortgage Broker: Ongoing Service Commitment

Once a broker places a mortgage for a client, you are a client for the life of that mortgage! Mortgage brokers encourage clients to call us at any time for advice on their existing mortgage, and we will keep the client up to date on any mortgage news and how it pertains to their situation. A client may be in a variable rate or adjustable mortgage product. Brokers can provide guidance as to whether locking in the rate is in the client’s best interest or if its more favorable to stay with their current product.

A mortgage broker will always encourage their clients to call for advice on future plans for any additional purchases as well. With the ever-changing mortgage guidelines, brokers can help navigate the process for any new properties and subsequent mortgage financing for vacation properties, rental properties or a second home for a child attending university.   Life is unpredictable and mortgage brokers are there for their clients to assist with all of life’s circumstances. A mortgage broker has experience in dealing with many different situations such as refinancing to renovate a home, a new marriage, a divorce situation that requires a spousal buyout or perhaps an out of province move.

Brokers like to keep in touch with their clients in order to pass along any pertinent mortgage news or changes that are taking place in the market. Brokers want their clients to be aware and knowledgeable about how any changes may affect them currently or in the future. An experienced broker is always transparent with their clients, providing the information and options available to help their clients make the best decision given their circumstances. Because of this, brokers will be in touch various times throughout the year as changes pop up in the market.

Knowledge is powerful, therefore brokers provide an ongoing service commitment to keep in touch with their client base and pass along as much knowledge as possible.

As always if you have any questions or concerns, let me know.

Sarah

Reason #8: Understanding the Fine Print

Obtaining a mortgage is a very paperwork intensive process. You will be initialing, signing, and waiving things like never before. A good mortgage broker will never tell you to just “sign here”.  We will educate you and make sure you understand everything you are signing, as a knowledgeable third party.

Your documentation package for review will include the following:

• Lender’s Commitment including all of the terms and conditions, which can vary from lender to lender.
• Full cost of borrowing disclosure. How much does your mortgage actually cost you over the term of the loan. What is the APR on your loan?
• Your property appraisal (if applicable).
• The mortgage life and disability insurance options that might be available to you.

The final review and signing of documents for either a purchase or a refinance is done at your lawyer’s office. As your mortgage broker, we ensure that you arrive for your meeting at the lawyer’s office educated and well prepared to finalize the mortgage.

As always, if you have any questions or concerns let me know.

Sarah

Reason #7: A-B-C Lending Solutions.

We have relationships in place with a variety of lenders including major banks, trust companies, credit unions, monoline lenders,  alternative lenders and private lenders.

Not everyone has a perfect application for an ‘A’ type mortgage product. For example, self employed individuals with lower taxable earnings or those with a bruised credit history may not fit under ‘A’ criteria. There are still several lending options available for those who may not be able to secure mortgage financing with a traditional ‘A’ lender.

A great mortgage broker has strong relationships with various alternative lenders to assist in these situations. Slightly higher interest rates and fees are associated with these type of applications. Alternative lending is best positioned as a short term solution until the clients get their credit back in line or has established the required income needed to qualify with an ‘A’ lender.

Due to the new mortgage underwriting guidelines, private lending has also become more prevalent. Private lending is more expensive than alternative lending in the short term, but can be a good option for those that don’t fit A or B qualifying criteria. Real estate investors and ‘flippers’ can benefit from these private lending solutions.

To summarize, it is valuable to have an experienced mortgage broker working on behalf of the client as brokers have a broad range of lenders to work with and can offer clients the best combination of service, price and product features available depending on the clients situation and their future goals.

As always, let me know if you have any questions or concerns.

Sarah

Reason #6:  Options, Options, Options.

A good mortgage broker has access to a variety of lenders and products to suit your needs. Everyone wants the best rate, but a good mortgage broker will help you choose your lender and mortgage product based on other factors as well as rates.

A few of the other factors to consider, for example:

Term: Fixed or variable rates and open/closed terms: There are advantages and disadvantages to be discussed and considered.

Portability: Do you plan on moving to a new home within the term of the mortgage?

Pre-Payment Privileges: Flexibility to make additional lump sum payments against the principle and/or increase your monthly payment amount throughout the term.

Payout Penalties and IRD Calculations: Understanding how your penalty will be calculated if you break the mortgage before the end of the term.

Interest Compounding: Semi-Annual versus Monthly.

Structuring Multiple Components: Would you like to attach a home equity credit line to your mortgage? Perhaps you may wish to diversify your home investment by setting up your mortgage as part variable and part fixed rate.

Front or Back End Insurability: This has become a very complicated factor with the most recent wave of government rule changes. Insurability can impact many things, including your rate and the option to transfer your mortgage down the road.

Special Insurer Programs: In the event of a purchase, there are various Insurer programs that may be available to you. The flex-down to help with down payment, or a purchase-plus-improvements product to help with renovations might be right for you. The CMHC Green program is becoming more and more popular for those making environmentally friendly upgrades.

It is important to know all of the options before you decide on a mortgage product. A trusted mortgage broker will guide you through this, and provide you with a variety of solutions to suit your short and long term goals.

As always, let me know if you have any questions or concerns.

Sarah

Reason #4. Negotiation

A Mortgage Professional represents the client and ensures the mortgage secured best suits their needs.

A good mortgage broker is a savvy negotiator. Mortgage brokers are independent, trained professionals licensed to represent and provide the best advise for the clients’ mortgage needs. Mortgage brokers know where the best rates can be found, and we represent the client to negotiate best terms, conditions and rates. Often times, a broker can even find better rates at the client’s existing bank. Not only does this save the client money, but invaluable time.

Mortgage brokers represent the customer. Because we are not employees of a lending institution, brokers are not limited to one specific product. Instead, we seek out the best lender package to suite the client’s specific situation, whether it’s with a Chartered Bank, Trust or Insurance Company or Private Funds. There is a wide assortment of options and features available to home-buyers today and shopping around takes a lot of time and effort. Given the new government rules that were implemented on January 1, 2018, the mortgage process can be intimidating. It pays to work with a mortgage professional who will represent the client and negotiate on their behalf to ensure the mortgage is the best option for them. Choosing the wrong mortgage option can cost thousands of extra dollars. Mortgage brokers are trained professionals who can help save the client’s money.

As always, let me know if you have any questions or concerns.

Sarah