25 years of originating mortgages!   It really is a good time for reflection.   When I first started out, I didn’t know anything about mortgages, except that I had one and that my husband and I had to be sure we could make our payments – I shall digress briefly and tell you that we barely got approved for our first mortgage due to our incomes being so low!  But we were persistent and with good credit our “exception to qualifying ratios” was approved.

In 1991, mortgage approvals were carried out very differently.   I had my own lending limit which meant I could meet the client on a Tuesday night, run their credit check, look over their employment documentation and tell them they were approved just subject to a review of the property.   Today, it’s a much lengthier process requiring at least one, if not two, adjudicators involved in signing off the mortgage request.

The greatest thing about having been fortunate enough to survive in the mortgage business for 25 years is the people I have met along the way.   My clients are outstanding, wonderful people.   They are focused, easy to work with and I applaud their efforts to own their space in this city! Many of my clients have ventured out of the Lower Mainland to other areas of the province or Canada, and I am still in touch and still assisting them with their mortgage inquiries – these are long term relationships which I will continue to treasure.

I look forward to assisting both new and longstanding clients with the challenges ahead, such as navigating the new mortgage rules that came into effect October 17^th. I can honestly say that the mortgage business never gets old!  The Bank of Canada and the provincial and federal  governments have ensured that there will  always be something new to learn!  But the best part of being a broker? I can always find a home for what my clients need!

Thank you for your support, and cheers to more years of mortgage originating!

As you have likely heard, the Bank of Canada opted to hold the overnight rate as is, meaning there will be no change in variable rates.  In its press release, the Bank of Canada stated that “The federal government’s new measures to promote stability in Canada’s housing market are likely to restrain residential investment while dampening household vulnerabilities.”  The press release also suggested that these housing measures should mitigate risks over time to Canada’s financial system.

While variable rates will remain the same, the same cannot be guaranteed about fixed rates.   The effects of the recent federal government measures to “stress test” mortgage applicants will become apparent in the next couple of months, and I will keep you updated on changes, as well as my subsequent analyses.

In their press release, the Bank of Canada also noted that household spending is also continuing to rise, as are incomes outside of “energy-intensive regions.”

To recap on my thoughts on the recent federal government’s measures, read an earlier post: http://nazarina.com/blog_post?id=17727

Want to brush up on your mortgage terminology?  Check out my blog of Key Mortgage Terms You Should Know

Call me today!

Not every home purchase will be your forever home.  Sometimes, we outgrow our homes and look to move on to homes more suitable to our current needs.  You may outgrow your house before your mortgage term is up, which may lead you to wonder what happens to your mortgage if you sell your home before your term expires.

Can I bring (port) my mortgage to my new property?

If you are buying a new home and selling your property to which your current mortgage is tied, you may be able to port your mortgage to your new property.  Some lenders require you to close your old home and new home on the same day, so if you are not planning on buying or moving right away it is important to clarify this requirement with your lender.

Will I be charged a penalty for breaking my mortgage?

In almost all cases, penalties are charged for breaking your mortgage term early, unless you have a totally open mortgage.  If you have a fixed term such as a five year fixed rate term, your lender may charge you thousands of dollars in penalties in what is called an interest rate differential. If you are breaking a variable rate term, the penalty is typically three months interest. Some lenders may even require you to payback any rate discounts or cashbacks you received when you took out the mortgage    Even if your new mortgage term is at a better rate, the penalty may end up costing you more money in the long-run so check with your mortgage specialist to determine if it’s worth it to break your mortgage term early and what you can do to reduce the penalties.

What about open mortgages?

Open mortgages will offer you more flexibility, but they are usually only available at higher rates.

How can I mitigate the potential costs of breaking my mortgage?

If you are looking to break your mortgage before your term expires, you can try to mitigate penalties by maxing out your prepayment options, if your mortgage agreement allows for prepayments. 

What should I do?

Before signing on to a mortgage, it is important to read all the fine print.  A bank may be offering you a super low rate, but there may be stiff penalties if you are forced to break the mortgage term. What seems like a good deal now may end up costing you a lot more in the future.  A mortgage broker will make sure that you not only receive a low rate, but will also ensure that the mortgage terms fit your needs.

Call me today to discuss how I help my clients find the best mortgages to suit their unique situations.

Some thoughts on the Federal Government’s recent announcements:

Some effects are already apparent as some mortgage companies have stopped taking applications for self-employed clients and rental properties, and refinances have to close by Nov 16 so after that date, they will not be taking refinances either. Other lenders will continue to take the above applications but with a small premium in rate.   What this means is that there will be less lenders for clients to choose from which means that consumers could be looking at higher rates for those applications.  There will also be longer wait times for the lenders that will process those types of applications.

It’s unclear which mortgage companies will still do refinances, rentals, super-jumbos ($1 million+) and 26- to 35-year amortizations come December. As we’ve seen, some lenders have already announced their (hopefully temporary) withdrawal from these categories.  It’s going to be a week or two before we know the bank’s appetite. They won’t rush to load up their balance sheets with non-standard mortgages. That, we know.  The biggest issue is lack of competition, and how non-bank lenders compete in the aforementioned categories.

This is also another hit against self-employed applicants, so they are best to get their ducks in a row in terms of documentation, income reporting, financial statements, etc.  Because even if the banks are the ones who end up with this business, they are not going to want their book of business to be full of self-employed files as they are usually more risky.  So they will either just say no to the file or price it higher.   Either way, not great for the consumer.

A good portion of first time buyers will be taken out of the marketplace.  If you have less than 20% down, it may be much more difficult to qualify at 4.64%, and many applicants will not qualify.   The higher rate qualification means that consumers will qualify for about $100,000 less than with the old rules.

I agree with what Morneau is trying to do but I think that the Federal Government should have consulted with mortgage industry professionals before putting this into effect.  (FYI, mortgage brokers originate 50% of first time buyer purchases).   

Furthermore, one area that has not been addressed at all is “consumer debt”, such as credit cards, personal loans, etc.   These are the real reason consumers have credit issues…they have too much consumer debt,  it’s not the mortgage.  And yet, with all these announcements, this issue has not been addressed.   So if a client cannot refinance, they will just open up another credit card if they need assistance, which will cost them more and leave them more susceptible to higher interest rates and possible cash flow issues.   

As I’ve said before, consumers should ensure their paperwork is in order as it will be harder to get approved for financing going forward.   So income taxes should be up to date, self-employed applicants should ensure their income taxes are paid and that they have financial statements for their company.  Pay attention to your credit – how much you have, making monthly payments on time, etc and keeping your credit score high.   And in terms of property, the “odd” property will be harder to finance.   So when buying, look for a marketable property.

Consumers should ensure that they are working with a mortgage professional that can help them navigate through this uncertain time.   It is critical you have a mortgage professional who will take the time to explain some of these issues to you and who will ensure that you still get the best package in light of all the changes. 

Please see my previous blogs for details on documents required for purchasing and other tips when seeking a mortgage approval.