| Qualifying Rate | 5.14% |
| Prime Rate | 3.00% |
| Next BOC Mtg. | May 29 |
According to a Scotiabank survey, 6 in 10 mortgage holders say they could add a little extra ($20) to their mortgage payment without impacting their finances.
It makes you wonder about the other 4 in 10 (but that’s another story).
The question here is, what would $20 extra per month mean to the average mortgage? The answer: It would save the typical borrower almost $2,800 in interest over 25 years and reduce his/her amortization by 10 months.*
Consumer advocate and Toronto Star columnist Ellen Roseman released a book a few months ago called Fight Back: 81 Ways to Help You Save Money and Protect Yourself from Corporate Trickery. It features quick-hit financial tips derived from her columns and
blogs.
We were anxious to read some of her mortgage suggestions, of which there are many. Here are a few such examples:
People haven’t been lining up for short-term mortgages, given the mesmerizingly low rates on 5- and 10-year terms.
But if you’re a financially secure borrower and you believe that rate direction is random (it is), then 1-year rates shouldn’t be written off. That was my topic in this week’s G&M column.
By way of example, suppose you need to borrow for at least five years. If you’re not risk averse, you might consider options like a:
In March 2012, the Financial Consumer Agency of Canada (FCAC) announced improvements to the disclosure of mortgage prepayment charges.
Those improvements were designed to make life easier for people needing to assess the cost of an early refinance or mortgage termination.
The first set of enhancements arrived by last September. Among other things, they required banks to develop online educational material about IRD charges and online prepayment charge calculators.
The final measures came into force just this month. As a result, banks will now be providing:
Despite record-low 10-year fixed rates, one could argue that the odds still favour shorter terms—at least for financially secure borrowers.
The historical advantage of shorter terms and the lower probability of dramatic rate increases are two common arguments against 10-year mortgages.
But last week, Scotiabank weakened these arguments by launching a record-low 10-year fixed rate of 3.69%. In doing so, it made it a little harder to dismiss decade-long terms.
Continue reading "Scotia Ups the Ante on 10-year Mortgages" »
We received surprising data last week from Revenue Canada on participation in the Home Buyer’s Plan (HBP).
That’s the program where “first-time buyers” can borrow up to $25,000 from their RRSP to use as a down payment.
Almost 1.8 million Canadians participate in the HBP, according to the latest available numbers from CRA1 but here’s the interesting part…
Continue reading "Disappointing New Stats on the RRSP Home Buyers Plan" »
Collateral charge mortgages got more bad press on Friday after CBC’s Marketplace ran this report.
The gist of it is that collateral mortgages "effectively trap you at the bank," says the CBC (which is not entirely true…more on that below).
TD Canada Trust, which sells only collateral charge mortgages, was caught in CBC’s crosshairs. An undercover reporter went into a TD branch with a hidden camera, asking the mortgage rep what made TD mortgages different than those at other banks.
After being questioned in four different ways, the TD rep finally disclosed that TD’s mortgage was a collateral charge, saying:
Continue reading "TD Takes Heat for its Collateral Mortgages" »
Title insurance is usually an afterthought for people getting a mortgage. But it’s becoming more of a decision point since so many lenders now require it.
The purpose of title insurance is to protect you if there’s a problem with your title. Those problems can turn into expensive nightmares in the small chance that you encounter them. Examples include ownership disputes on your property, title fraud, un-discharged liens, encroachments, zoning issues, survey problems, property tax arrears and so on.
Quotes on Canada’s 5-year government bond yield are no longer displayed on Bloomberg.com.
Since bond yields usually precede changes in fixed mortgage rates, Bloomberg’s 5-year yield page has been a useful tool for mortgage observers. That is, until today.
Apparently, the company feels it will earn more by keeping this data proprietary to its $1,500+ per month data terminal service.
Fortunately, for you bond watchers in the crowd, there are other providers of free yield data, including:
Continue reading "Bloomberg.com Pulls the Plug on 5-Year Bond Data" »
As rate comparison websites evolve, something interesting will happen. Lenders and brokers will realize how easy it is to put special offers in front of thousands of eyeballs.
As new competitors see this, they’ll join the online fray and rate discounts will slowly improve…one basis point at a time.
The best deals won’t always come from one single lender. At any given time, lenders anxious to place money will advertise aggressive specials, fill their pipeline with applications, pull out of the market and let someone else take the lead.
This isn’t much different from how it works today, except that Internet-focused lenders will get their fill a lot quicker than they do through current distribution models (because rate sites will give them more exposure).
But these changes will take time to set in. If you’re looking for the lowest advertised rates today, credit unions and online mortgage brokers are clearly the market leaders. Here’s a quick look at where the national market stands for well-qualified borrowers:
On Thursday, Amanda Lang—co-host of The Lang and O’Leary Exchange—made a comment worth exploring.
While talking with Kevin O’Leary about the risks of variable mortgage rates, she stated:
"Some people can forecast [rates] and arrange their affairs accordingly. Rates won't...gap up. They will climb in some orderly fashion.
…It's very rare to see a multi-move up or down with interest rates…People of means…can actually take their time…and then still lock in with plenty of time to get a decent longer-term rate.”
If you’ve studied rate history, however, you know that interest rate behaviour doesn’t cater to these assumptions.
Continue reading "Feeling Lucky? Go Variable With Plans to Lock In" »
Ever since the credit crisis, there’s been an ongoing clampdown on mortgage risk. Nowhere is that more evident than with rental and self-employed mortgages.
This week’s Globe column looks at rental financing—and what makes it more challenging today than, say, four years ago.
If you’re a well-qualified borrower and you only own a few properties, this isn’t a major concern. But when you have a larger rental portfolio or need flexibility with your application, it’s a different story.
Will we ever stop writing about which rate is better: fixed or variable?
It's doubtful.
And the answer will probably always be: “It depends.”
Yesterday, Rob Carrick from the Globe & Mail ran this story on why variable-rate mortgages should not be written off. Its main arguments are that rate risk has declined and historical studies support variable rates.
Well, in our books, Carrick is one of the best tell-it-like-it-is writers in personal finance. But this particular story needs at least a teaspoon of perspective.
For hopeful homeowners with severely damaged credit, there’s a long road to travel to become “bankable” once again.
Thankfully, time heals all - even credit catastrophes. Those in "credit rehab" may find their mortgage options to be limited in the early days (typically because they don’t have a big enough down payment for a lender to take a chance on them). But there is light at the end of the tunnel.
The post that follows examines non-prime mortgage tactics and other "B" lending issues. We talked with Fred Testa and Greg Domville. Both are well-known brokers specializing in alternative lending (a.k.a. non-prime or subprime lending). They were kind enough to answer every question we threw their way.
Some folks spend their way into bankruptcy. Others become insolvent due to unavoidable personal crises.
Either way, everyone deserves a second chance at good credit, and a chance to be a responsible homeowner.
This week’s Globe column looks at how people can get back on their feet and position themselves for a mortgage. We’ll follow up with a post tomorrow outlining additional tips for the credit-challenged.
Tens of thousands of Canadians employ leveraged investing strategies like the Smith Manoeuvre. They rely on these techniques to magnify their investment gains and to pay down their mortgage faster.
For those not familiar with it, the Smith Manoeuvre entails:
You need a readvanceable mortgage (a.k.a. HELOC) and at least 20% equity to employ the strategy.
If you’re getting a new long-term mortgage, odds are you’re going to fiddle with it before maturity.
The majority of people will either:
Some of the above will require an early pre-payment charge (a.k.a. penalty). This week’s Globe column poses ten questions to help you avoid mortgage-penalty shock.
Guest Column by Gary Ford, Author, "Life is Sales"
In sales and in life, people want more. They want more business,
they want a better deal on their mortgage, they want a raise...
In my book "Life is Sales," I discovered that most adults rarely ask for what they want. They much prefer to hint at their desires instead.
Children are the complete opposite. Observe any child and you'll quickly notice that they have no problem asking for what they want. In fact, they have an arsenal of ways to ask and rarely ask just once.
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