31 Mar

Experts best at brokering mortgage


Posted by: Kimberly Walker

Experts best at brokering mortgage

Denise Deveau, Postmedia News · Mar. 30, 2011 |

Cheryl Hutton and Aaron Coates always thought getting a mortgage would be a challenge. But within 18 days of visiting a mortgage broker, they were able to close a deal on a new townhouse in Calgary without a hitch.

Now in their early thirties, both have careers in the theatre, something Ms. Hutton says has been a bit of a sticking point with banks. “In our industry we never fit the paperwork guidelines ‘for the banks.’ For some reason, people don’t think we pay our bills.”

Although it was their first home purchase, Ms. Hutton says it was surprising how easy the whole process was once they had someone who could walk them through it. “He sat us down, told us what our options were, showed us that it was possible and explained all the steps we needed to take. If it wasn’t for him, we may not have made the leap.”

Sorting through a mortgage process and negotiating rates can be overwhelming for first-time and seasoned home buyers alike. That’s why people such as Ms. Hutton and Mr. Coates turn to brokers to do the legwork for them.

Yet mortgage brokers will tell you that a good portion of home buyers out there don’t really understand what they do. “Part of the challenge we have in our world is that people aren’t really sure what a mortgage broker is,” says Gary Siegle, regional manager for Invis Inc., a mortgage brokerage firm in Calgary.

Brokers should not be confused with “rovers,” mortgage specialists attached to a specific financial institution who visit customers outside of banking hours, Mr. Siegle explains.

“They only deal with that bank’s product. A broker, however, is an intermediary whose job is to make a match between a lender and a borrower. We represent the individual, not the bank.”

About 30% of mortgages in Canada are done through a broker, according to Perry Quinton, vice-president, marketing, for Investor Education Fund, a Toronto-based non-profit financial information service.

“The reason more people don’t know about them is because the banks are so visible. It’s easy to gravitate to them when you have your savings accounts, credit cards and investments there already,” Ms. Quinton says.

Going for the comfort factor could cost you however, she adds. “A broker has access to different lenders including banks, and can shop rates and features. A half per-cent may not sound like much but that could make a difference of about $20,000 for a $250,000 mortgage amortized over 25 years. Any little bit helps.”

Mr. Siegle confirms that shopping around can deliver significant savings.

“Let’s take today’s average posted rate of 5.44%, and you get a point off that at your bank. So you think you just got a really great deal. But the vast majority of rates we deal with as brokers would be another 30 basis points lower -around 4.14%. And if you look at preferred deals that don’t offer features such as prepayment privileges, it can get as low as 3.89%. That’s another 25 basis points below what’s generally available.”

The reason for that is simple, he says. “We offer wholesale rates, banks offer retail.”

For anyone considering a broker, Ms. Quinton advises people to do a bit of groundwork first if they have the time.

“It helps to educate yourself about options and what you can afford. Look at all your living expenses, including student loans and credit card debt. Chances are you are understating those.”

Another thing to look into is the different types of available mortgages and features, including interest rates, payment frequency, amortization, cash-back programs and the ability to make lump sum payments.

“Knowing these things before you go in can save you a lot of money,” she adds.

Any mortgage broker you choose should always meet the right licensing and education requirements, so be sure to check their registration.

If you’re not completely prepared, however, that shouldn’t be a concern when working with a good mortgage broker, Mr. Siegle says.

“After all, mortgages are pretty much all we do. So even if you come in cold, good brokers will walk you through the process and ask all sorts of questions,” Mr. Siegle notes.

“You just need to be prepared to answer them openly and honestly so they can get you the best deal possible.”


Mortgage literacy crucial for first-time buyers

Vito Cupoli, Postmedia News · Mar. 30, 2011 | Last Updated: Mar. 30, 2011 4:04 AM ET

Two years ago, when Michelle Gompf and Jesse Bagelman started thinking about buying a house, they assumed it would be impossible to qualify for a mortgage because of some heavy debt and Mr. Bagelman’s status as a self-employed stone mason.

Rather than give up, Ms. Gompf -now Gompf Bagelman -launched a campaign. “I made up some little posters with a target date called Operation Jesse & Michelle Buy a House. I put them up where we couldn’t miss them -on our fridge, on the bedroom dresser, our laundry, office. I had them everywhere. I just wanted a house to be top of mind. We’re going to figure it out.”

A friend in real estate suggested she speak with a mortgage broker to see how close she was to qualifying for a first-time mortgage. “The broker really worked his magic, and next thing you know we were approved with a monthly payment that was less than the rent we were paying for our basement apartment,” she says.

She knew very little about the mortgage process initially, which is typical for first-time buyers, says mortgage broker Sandra Grywul.

“For the most part, the first-time homebuyer doesn’t know anything about financing a home,” says Ms. Grywul, owner of Always A Mortgage in Toronto.

“It’s funny, because buyers are thinking so much about what neighbourhood they want to live in, how many bedrooms, bathrooms, square footage. But they’re not thinking about what kind of mortgage they want to enter into.”

And buyers shopping for a mortgage have a lot of choices to sift through. Fixed term or open? Variable or fixed rate? Should they use their RRSPs for a down payment?

But Ms. Grywul says those decisions should be made after the buyers have tackled the most important element, which is to understand how much mortgage they can actually afford.

“The bank will look at your credit report but it won’t know if you like to spend $300 for a haircut or eat in an expensive restaurant each night.

“New homeowners go in, they get the mortgage that the bank says they can qualify for, and after two or three months into the house they’re calling around to see if they can do a consolidation or a refinance.

“The joy of their home has completely dissipated because they didn’t take into account all their monthly expenses when figuring out how much they could afford per month on their mortgage.

“I see this all the time. So as part of getting pre-approved for a mortgage, buyers need to be very honest with themselves about how much money they need to live happily,” Ms. Grywul says.

Toronto real estate agent Cameron Weir of Royal LePage, Johnston and Daniel has worked with a number of first-time home buyers.

He says it’s exciting to watch people go from being renters to owners. He says mortgage pre-approval is vital because it allows the buyer to be nimble in an active market.

“A lot of times today we find that there’s more than one offer in on a property. And if you don’t have everything set with a pre-approval, when your perfect property comes up you can’t close the deal without arranging financing first,” Mr. Weir says.

“While you’re working that out, a competitor who has already done his homework might make a firm offer at the same price and unfortunately you’ll probably lose that property.”

Mr. Weir describes the first-time buyer as “very excited, very nervous, lots of questions. It’s the biggest purchase they’re going to make, after all. But along with that, they’re also pretty cautious.”

Ms. Gompf Bagelman’s fear of high lawyer fees made her cautious. She was also concerned about having a stable and predictable monthly mortgage payment, so she chose a five-year mortgage and a fixed interest rate on the house she and her husband took possession of in February.

“With a variable rate I worried that I don’t have a lot of experience with these interest rates and anything could happen,” Ms. Gompf Bagelman says. “But the five-year term gives me security right now. So I have the current safety net and hope for something better when the five years are up.”

She also wondered if the recent mortgage crisis in the United States would complicate her home financing. And while that financial mess did foster changes in some Canadian mortgage regulations that take effect in April, Ms. Grywul says they don’t have any impact on the first-time buyer.

Instead, they focus on the refinancing business and on those who purchase second homes or investment property.

In considering all the details and requirements of financing a home, Mr. Weir says, “the most important thing is to find the right place, at the right price at the right time.”


21 Mar

Lower Inflation In February – Rates to Keep Low


Posted by: Kimberly Walker


Lower inflation in February likely to keep interest rates low


Canada’s annual inflation rate fell slightly in February, giving the Bank of Canada room to keep interest rates low over the next few months, economists say.


Statistics Canada said Friday its consumer price index edged down one-tenth of a point to 2.2 per cent in February, with rising energy and gas prices keeping inflation just above the Bank of Canada’s ideal two per cent target.


The core inflation rate, which excludes volatile items such as gas and food, fell to 0.9 per cent — its lowest level since the government started keeping records in 1984. Economists had predicted an annual core rate of 1.1 per cent and annual inflation to remain at the January level of 2.3 per cent.


It all means the country’s central bank might take its time when it comes to raising interest rates, said CIBC World Markets economist Emanuella Enenajor.


“These (inflation) numbers certainly make it less likely that a May rate hike could happen, we do have to admit,” she said.


“Such a soft core number suggests there’s less pressure for the Bank of Canada to really start hiking rates aggressively so it gives it a little more leeway.”


She said CIBC is for now sticking with its prediction that Canadians will see rates go above the current one per cent in May and that they will end up at two per cent by the end of the year.


Canada’s economic growth surpassed expectations in the last half of 2010 and the Bank of Canada may want to get ahead of any resulting spike in prices by raising interest rates and cooling lending conditions, she said.


Doug Porter, deputy chief economist at BMO Capital Markets said he believes the central bank is likely to stick with lower rates for the short term.


“Both headline and core inflation have eased since the start of the year, at least partly thanks to the lofty loonie,” he wrote in a note to investors, pointing out that Canada’s core inflation rate is lower than that of the U.S. and rest of the world.


“This is set to reverse next month, as Canada gets with the global program, but the low starting point is very favourable. Suffice it to say that this keeps the pressure well off the Bank of Canada to get back in tightening mode any time soon.”


Enenajor said the March inflation rate will likely depend on oil price movement during the rest of the month.


“However, expect both the annual headline and core rate to move higher in March on a year-on-year basis,” she said.


Prices were higher in February in six of the eight major categories tracked by the agency, but items like women’s clothing, footwear and travel tours cost less than a year earlier.


On a month-to-month basis, consumer goods were 0.3 per cent more expensive last month than in January, mostly due to higher energy and gasoline prices. Canadians paid 10.6 per cent more for energy during the year leading up to February, after posting a nine per cent increase in January.


Gas prices soared 15.7 per cent last month, on top of the already recorded 13 per cent increase in the 12 months leading up to January.


On a regional basis, Nova Scotia remained the province with the highest inflation rate at 3.4 per cent. Many people in that province use oil and other fuel to heat their homes.


Alberta continued to enjoy the most stable prices, with an inflation rate of 1.2 per cent.


Drivers in every province except Manitoba faced double-digit price increases for gasoline on a year-over-year basis. The price at the pumps was up 15.7 per cent from a year earlier.


The Canadian Press http://www.therecord.com/news/business/article/503435–lower-inflation-in-february-likely-to-keep-interest-rates-low 























11 Mar

New Mortgage Regulations Effective March 14, 2011


Posted by: Kimberly Walker

Effective March 14, 2011


Maximum Amortization Period


High Ratio Business

  • For high ratio deals, (loan to values greater than 80%) the maximum amortization has been reduced to 30 years from 35 years.


Conventional Business

For conventional deals, (loan to values less than 80%) the maximum amortization will remain at 35 years for Dominion Mortgages


Refinance Maximum Loan to Value


  • The maximum loan to value for 1-4 unit residential properties will be reduced to 85% from 90%. 


How does this impact my existing borrowers that are looking to straight port? 


  • For high ratio deals with amortizations greater than 30 years borrowers will maintain their existing amortization on a straight port (no additional funds).
  • The loan to value maximum will remain at 95% for port transactions.  Product and program specific guidelines apply.


How does this impact my existing borrowers looking to refinance or port and increase?


  • In some instances, but not all, for high ratio transactions borrowers with amortizations greater than 30 years will be permitted to blend their amortization.  The maximum loan to value for refinance transactions will be 85% and the maximum loan to value for a port and increase will remain at 95%.  Product and program specific policies apply.


  • Blended Amortization example:
    • Original high ratio loan: $200,000 with 38-yrs amortization remaining (original 40yrs – 2yrs elapsed = 38 remaining)
    • Formula: (200,000 x 38 + 100,000 x 30) / (200,000 + 100,000)
    • Blended Amortization = 35 yrs



1 Mar

Average Bankrupt Person is 41, married and has 4 credit cards


Posted by: Kimberly Walker

Average bankrupt person is 41, married and has four credit cards, study says

The average Canadian who files for bankruptcy owes $59,800 not counting his mortgage and is a 41-year-old married man with four credit cards, according to a report by a Kitchener-based bankruptcy trustee.

The information, released Monday by Hoyes Michalos & Associates, says this amount owed by the average bankruptcy filer is about three-and-a-half times more than the debt level of the average Canadian.

The report is based on an analysis of 8,000 insolvency filings the firm dealt with in 2009 and 2010 and offers a profile of men, women, and seniors.

“The current economic climate, combined with easy access to credit has increased the risk of insolvency for the average Canadian,” the report said. “It now takes more of each Canadian’s take-home pay to service the debt that they have accumulated. If anything interrupts the average person’s income, even for as little as a month or two, they find themselves unable to meet their obligations.”

The report, called Joe Debtor: The Face of Bankruptcy found:

58 per cent of those who file for bankruptcy are male and they take home $2,240 a month after tax, slightly less than the national average;

60 per cent are between the ages of 30 and 59;

The average bankrupt has credit card debt of $24,400, owes $13,800 to banks, $5,400 in back taxes, and has other debts worth about $16,200, owed to finance companies, payday loans, for student loans, and to family and friends;

The number of over-55s in financial trouble is increasing and their debts are greater.

The report takes aim at the assumption that people who file for bankruptcy are unemployed: in fact, the average insolvent person is working and earns close to the Canadian average of $2,419 per month.

“The principle difference between our debtors and the average Canadian is their debt,” the report said.

The report found that between 2008 and 2010 the average debt carried by those who file for bankruptcy increased 17 per cent. The largest increase was in credit card debt – which grew by about one-third.

“The recent downturn in the economy, combined with job loss or income reduction, has forced more families to rely on credit to pay their every day bills,” the report said.

There has also been an increase in the number of people over age 55 who are snowed under by debt. In the same two years the portion in that age group rose to 16 per cent from 12.5 per cent.

“An increasing number of Canadians are entering retirement with debt,” the report said. “Another alarming trend is the increasing propensity of retired Canadians to assume more debt during retirement.”

On average, debtors in the 55-plus group owed about $74,000 in unsecured debt, including credit card debt of $37,000. Half of these debtors are living on their own but one-third still has a dependant at home. Their average take home pay was $2,133, well below the Canadian average.

Only one-third of older bankruptcy filers had RRSP savings and the average total value was about $30,000.

“Approaching retirement without a safety net savings, combined with higher debt levels, significantly increases the risks of bankruptcy,” the report said.

The profile of the average student debtor is a single female, 35, owing about $50,000 of which about $14,400 is student loans. She is also more likely to be divorced or separated and a single parent.

The firm’s research also shows that more than half of bankrupts admitted that they were overextended and mismanaged their finances, but that mismanagement was typically caused or dramatically increased by separation or divorce, job loss or personal illness.

“The difference between a bankrupt and a non-bankrupt may be as simple as this: the bankrupt lost his job, and the non-bankrupt didn’t. Or perhaps the bankrupt got divorced, or was off work for a medical issue, and the non-bankrupt wasn’t,” trustee Doug Hoyes said in an interview.

“If you want to predict whether you will have financial trouble in the future, ask yourself this question: If I lost my job tomorrow, how long would it take before I could no longer pay my bills?”

The report is sure to add to fodder to the ongoing national debate over Canadian household debt levels.

Two weeks ago, the Vanier Institute of the Family reported that average family debt has now hit $100,000, and that for every $1,000 in after-tax income, Canadian families now owe $1,500.

Some economists say the odds of a national crisis spawned by consumer debt are remote as the economy continues to recover and add jobs.

But the Bank of Canada has been sounding the alarm on household debt for months, warning that interest rates are now set to rise from record-low levels, and that may put some consumers at risk. http://www.therecord.com/news/business/article/494137–average-bankrupt-person-is-41-married-and-has-four-credit-cards-kitchener-study-says

1 Mar

Bank of Canada Leaves Key Rate Unchanged


Posted by: Kimberly Walker

  Bank of Canada leaves key rate unchanged


Malcolm Morrison, The Canadian Press


The Canadian dollar gave up early gains and moved lower after the Bank of Canada’s announced it was leaving interest rates unchanged and warned of the negative effects of a rising currency.


The loonie was 0.12 of a cent lower to 102.82 cents US after the central bank announced its decision to keep the key interest rate at one per cent.


The bank observed that the economic recovery in Canada is proceeding slightly faster than expected and that “while consumption growth remains strong, there are signs that household spending is moving more in line with the growth in household incomes.”


But the bank also warned that “the export sector continues to face considerable challenges from the cumulative effects of the persistent strength in the Canadian dollar and Canada’s poor relative productivity performance.”

 The currency is riding at a three-year high.