This story is specifically speaking about Variable Rate mortgages.
I don’t have a crystal ball – I leave that for people that are smarter than I am but above is one man’s opinion.
Over the past few weeks there has been some major mortgage news. I want to address these issues directly so you can see how they may affect you. I believe if you can see clearly what the repercussions, if there are any, then you will be able to make an informed decision.
As you may have heard recently interest rates at Canadian Lenders have been rising above their historical lows. This was largely expected by the industry.
If you have been properly pre approved you likely have a rate hold for 120 days before you take possession of your property. So for example if you are expecting to take possession of your property on September 1, 2010 then you will get the best rate offered between May 4, 2010 and September 1, 2010.
So what does the industry think short term rates will do? Obviously we do not have a crystal ball but we feel that in all likelihood the recent rate hikes are temporary reactions to the market place. We feel that these rates will only rise slightly from their current levels, stay steady or even drop a little.
Rest assured that when you take possession of your property you will be getting a great competitive rate from a stable Canadian Lender.
You may have also heard that the insurers (CMHC/Genworth) recently changed some of their guidelines. The insurers do this from time to time and it is very typical – contrary to what the media sometimes leads people to believe.
For the most part they made the following changes:
- Most self employed people need to verify income. There are some exceptions to this so if you would like to investigate further then please call.
- Rental properties will need to have a larger down payment.
- If you decide to get a variable rate then you will need to qualify at the “Benchmark” rate. Currently sitting at 5.25%.
- If you decide to get a fixed rate with a term that is 4 years or less then you will need to qualify at the “Benchmark” rate. Currently sitting at 5.25% as well.
So if you are an employee of a company that is not owned by you, buying a home that will be your primary residence and getting a 5 year fixed mortgage then nothing has really changed for you in these guidelines.
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These types of situations are exactly the reason why people should use a mortgage broker – to cut through all the noise and get to the way that situations affect you specifically.
I am here to answer all of your questions. Please use my services and expertise to your advantage and I am sure that I will win your business.
As you may have heard some lenders in Canada have been raising their interest rates. This happens from time to time.
For those of you who maybe concerned about where your rate is going you need to ask one important question.
Have you been pre approved by a qualified mortgage broker?
If the answer is yes then you are likely just fine.
If the answer is no then you need to really consider getting that pre approval started with a mortgage broker and submitted to the lender as soon as you can.
Rates go up and down but with time we find that people who are prepared to commit are the ones that fair the best.
Please call if I can help in any way.
Jason
As I am sure that you have heard the Finance Minister of Canada has decided to make some adjustments to the lending requirements.
The following is a link to the official press release - http://www.fin.gc.ca/n10/10-011-eng.asp
The most important points are below.
- Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
- Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.
- Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.
I believe that the industry has a number of clarification questions that we need answered before we fully understand how this will affect the market place this spring.
When everything is all sussed out I will be sure to update you.
You know the old line, “There are only 3 things in this world that you can count on: birth, death and taxes”.
If you are purchasing your first home then it is likely the first time you will pay City Taxes. These taxes are separate from the income tax that you probably paid in the past. These taxes are levied by the city that you live in and are used to pay for things like roads, parks, street cleaning and hockey rinks. These taxes are very important to all people who live in the city because if these taxes are not collected from everyone then the city services would grind to a halt.
These taxes an annual assessment based of the value of the property. Once the value of the property has been established (they do this through a complex mathematical system) then the nominal tax rate is applied. This gives you an annual payment that is your part of the total city tax revenue.
These taxes are so important to cities that the province has created a law that if the home owner does not pay these taxes then before they can change possession to another owner – the taxes owing are collected from that revenue – even before the lender. This rule alone makes taxes a very important part of the mortgage process to the lender.
The lender wants to have all homes in its portfolio taxes paid so that if a house goes through the foreclosure process that they will get the full sum owed to them as first payable on the Title.
The lender will ensure that taxes are paid by one of two ways:
- They pay them on your behalf. The Lender takes 1/12 of the annual tax amount and sets that as the payment. This payment is added to your monthly mortgage payment.
- You pay them yourself monthly via the Tax Installment Payment Plan (TIPP) Program. Payments will be automatically taken from your bank account on the 1st of the month.