It’s Friday and since we heard Bank of Canada Governor Stephen Poloz mention that it’s unlikely rates are increasing any time soon (article below) it’s a good day to talk variable rate mortgages. Yes, not everyone can qualify at the BOC 4.99% rate and some clients prefer fixed rates  – but there are still lots out there who prefer this option (roughly 35% of the market)

Perks of Variable Rate Mortgages:

•  Lower payments
•  Paying down principle faster
•  Lower penalty if the mortgage is broken (3 months interest)
•  Can convert to a fixed rate mortgage at any time without penalty

We have some great options for those Variable Rate Clients – 4yr at P-55% // 5yr at P-50% and our Lendwise 5yr at P-55% with stricter underwriting guidelines.

IMPORTANT REMINDER — May 1st is the deadline for when the new insurance premiums go into effect.  Which means the deals need to be underwritten and sent to CMHC/GW by Wednesday April 30th at 9pm Pacific Time.  Thanks, Cindy and Amanda

Canadians still prefer fixed rates

by Jamie Henry | 21 Apr 2014

Brokers may be touting the advantages of variable-rate mortgages but more and more Canadians believe fixed-rate options are preferable in the current environment.

“Even though we’ve had a relatively stable rate environment for a number of years, Canadians are being prudent when it comes to mortgage planning and are factoring in the possibility of higher rates in the near future,” Barry Gollom, vice-president, secured lending and product olicy at CIBC said in an official relase. “With fixed rates near historic lows, Canadians see an opportunity to lock in for a number of years in order to reduce the risk of expected higher interest costs.”

CIBC conducted a Nielsen Consumer Insights survey of 1,005 Canadians between February 6-10. The survey found that 48 per cent of Canadians would choose a fixed rate mortgage if they had to make the decision today, compared to 31 per cent who would choose variable. 19 per cent were undecided.

“For those that have recently taken out a mortgage, and may have additional expenses or hold other debt, the predictability of a fixed mortgage rate may be more appealing,” Gollom said.  “However those who have paid off a sizeable portion of their mortgage are likely less sensitive to rate changes.”

The survey also found that 47 per cent of Canadians believe rates will increase in the next 12 months, up from 38 per cent from last year.

“The poll also revealed that younger Canadians were even more likely to choose a fixed mortgage, with 56 per cent of Canadians aged 25-34 saying they would lock in to a fixed rate today, a number that has been steadily increasing over the last four years,” the release states. “In contrast, more established homeowners (aged 45-54) were among those less likely to lean towards a fixed rate (43 percent).”
 

Broker debate: reverse mortgages

by Jamie Henry | 01 Apr 2014

They are becoming more popular but brokers are divided on whether reverse mortgages are the best option for aging clients looking to take advantage of equity in their homes.

“I can understand why many homeowners would be attracted to this type of finance as it’s a fixed rate compared to a HELOC, and it’s a way of getting cash quickly if you are going through a financial patch, but it’s not ideal, especially if you want to sell in the future,” Marc Abramovitz from Northwood Mortgage and founder of ilovemymortgage.ca said. “There are a lot of other options available and homeowners really need to do a lot of due diligence and get independent advice before signing up for this.”

With house prices out of reach and desperate to get their hands on hard cash quickly, many homeowners are expected to use reverse mortgages to help their offspring buy their first property.

And while reverse mortgages have been available since the introduction of the Canadian Home Income Plan in the mid-1980s, very few financial lenders have openly offered the product. However, with an aging population and dependent children needing help with down payments, there has been a report of rising interest in this financial method.

“I am seeing a lot more use and interest in reverse mortgages, especially for those who are in difficult situations,” Abramovitz said. “For example, one my clients had no mortgage on her home, and needed cash to reinvest back in her house. Her only other was to sell the property so a reverse mortgage was the best solution.”

For his part, Terry Kilakos of North East Mortgages believes reverse mortgages can be beneficial for older clients who require money and have paid already paid off their homes.

“I think it’s a good tool to have to offer older clients; I don’t compare them to HELOCs; they’re a different tool altogether,” Kilakos said. “People also have the option of taking the reverse mortgage in either a lump sum payment or (staggered) payments.”

These staggered payments can be treated like a paycheque in the event that a pension is not providing enough income.

Lenders rarely give reverse mortgages to borrowers younger than 62 years-old while the loan-to-value ratio can be as low as 25 per cent after accounting for closing fees. The mortgage can be paid off from the proceeds of the home’s sale, or by the estate in the event of a client’s passing.