What lenders will never tell you about a mortgage

General Angela Calla 19 Jan

Intelligently shopping for a mortgage is nearly impossible.  The terms all appear to be the same, you are bombarded with marketing, and in some cases you’re offered confusing bundle offers that sound amazing.  For years, clients have falsely thought it was all about the best “rate”.  Newsflash!!!  The rate is only a small part of a mortgage and what smart people have learned when seeking out a professional is that having a lower rate can actually cost you more.  Lenders are smart.   They will market their policies as advantages to customers even though the policies are very costly in the long run.  Unless borrowers gain clarity from a mortgage professional, they will never even know to ask about these mortgage details.   Below is what lenders will never tell you or quickly skim over:

1. Penalty Costs

Any lender that uses a posted interest rate and issues a discount off of that rate will cost, on average, three times more to exit the mortgage than lenders that do not use a posted rate.  If you go to the lender directly, they are there to sell you their product, so this is obviously not something that is brought to your attention.  Taking a mortgage like this can be financial suicide.   Borrowers learn about this the hard way when they sell their homes or when they want to take advantage of changes in the market or their lives.   At that time they learn that the higher costs will hinder or prevent their financial goals in a very bad way.  Provided that you and your property qualify with a monoline lender (a lender that doesn’t use posted interest rates), you would be crazy to get a mortgage elsewhere!   Only independent mortgage professionals have access to these types of lenders.   Their service is free and they place the mortgage with a lenders that best suit your needs rather than lenders that are trying to gain as much profit from you as possible.  HUGE difference. Don’t learn this the hard way. You don’t have to Google very much to see how people have been devastated by high IRD (Interest Rate Differential) penalties. It’s what lenders don’t tell you that ends up costing you.2.

2. Collateral charge

A collateral mortgage might be sold to you as something that magically allows you the ultimate flexibility to borrow more money later on.  In reality, it’s the ultimate trap. You still have to requalify for any future modifications to your mortgage and they register the mortgage for higher than your property value.   This means you can’t get secured lines of credit elsewhere or switch your mortgage at the end of the term without incurring exit fees!    Are you beginning to see how marketing and positioning doesn’t tell the whole story?  If you have a choice and your product needs allow it, don’t allow a lender to trap you.  This is where transparency is key, which is provided to you by an independent mortgage professional.

3. Lender History

How does your lender treat their existing clients? Is your lender constantly offering new clients all of the flash and dash with new electronics and free accounts but completely snubbing their existing customers with higher rates and fees?   Are they the first lender to raise interest rates and the last to decrease them? How do they handle changes in the market that may provide an opportunity for you to save money?   Do you think someone who is paid to work at a lender is going to bring this to your attention?  There are significant examples of this happening all of the time and if you qualify for a better lender, why would you take this abuse?

When you know better, you do better.  Mortgage professionals are here to provide you with clarity and the power of choice.   Don’t make the irreversible financial mistake of falling for a lender’s sales pitch.    As your mortgage professional, we are here to help save you from this and to help you achieve the lowest cost of borrowing.

The Angela Calla Mortgage Team gives you clarity on the best mortgage by being transparent, unbiased free mortgage advise with choice. We are here to help you personally with your mortgage at 604-802-3983 or callateam@dominionlending.ca

CMHC Increase Premiums as of March 2017

General Angela Calla 17 Jan

CMHC to Increase Mortgage Insurance Premiums

OTTAWA, January 17, 2017 — CMHC is increasing its homeowner mortgage loan insurance premiums effective March 17, 2017. For the average CMHC-insured homebuyer, the higher premium will result in an increase of approximately $5 to their monthly mortgage payment.

“We do not expect the higher premiums to have a significant impact on the ability of Canadians to buy a home,” said Steven Mennill, Senior Vice-President, Insurance. “Overall, the changes will preserve competition in the mortgage loan insurance industry and contribute to financial stability.”

Capital requirements are an important factor in determining mortgage insurance premiums. The changes reflect OSFI’s new capital requirements that came into effect on January 1st of this year that require mortgage insurers to hold additional capital. Capital holdings create a buffer against potential losses, helping to ensure the long term stability of the financial system.

During the first nine months of 2016:

  • The average CMHC-insured loan was approximately $245,000.
  • The average down payment was approximately 8%.
  • The average gross debt service ratio (GDS) was 25.6%. To qualify for CMHC insurance, a homebuyer’s GDS should not exceed 32% of their total monthly household income.
Down payment between 5% and 9.99%
Loan Amount $150,000 $250,000 $350,000 $450,000 $550,000 $850,000
Increase to Monthly Mortgage Payment $2.82 $4.70 $6.59 $8.47 $10.35 $15.98

Based on a 5 year term @ 2.94% and a 25 year amortization

*Premiums in Manitoba, Ontario and Quebec are subject to provincial sales tax — the sales tax cannot be added to the loan amount.

Premiums are calculated based on the loan-to-value ratio of the mortgage being insured. The premium can be paid in a single lump sum but more frequently is added to the mortgage principal and repaid over the life of the mortgage as part of regular mortgage payments. Additional details and scenarios are included in the backgrounder below.

CMHC regularly reviews its premiums and sets them at a level to cover related claims and expenses while also reflecting the regulatory capital requirements.

CMHC is Canada’s most experienced mortgage loan insurer. Our mortgage loan insurance enables Canadians to buy a home with a minimum down payment starting at 5%. As a Crown corporation, CMHC is the only mortgage insurer whose proceeds benefit all Canadians.

As Canada’s authority on housing, CMHC contributes to the stability of the housing market and financial system, provides support for Canadians in housing need and offers objective housing research and information to Canadian governments, consumers and the housing industry.

Backgrounder

  • CMHC’s standard mortgage loan insurance premiums will be changing as follows:
Loan-to-Value Ratio Standard Premium (Current) Standard Premium (Effective March 17, 2017)
Up to and including 65% 0.60% 0.60%
Up to and including 75% 0.75% 1.70%
Up to and including 80% 1.25% 2.40%
Up to and including 85% 1.80% 2.80%
Up to and including 90% 2.40% 3.10%
Up to and including 95% 3.60% 4.00%
90.01% to 95% – Non-Traditional Down Payment 3.85% 4.50%
Down payment between 10% and 14.99%
Loan Amount $150,000 $250,000 $350,000 $450,000 $550,000 $850,000
Increase to Monthly Mortgage Payment $4.94 $8.23 $11.52 $14.81 $18.10 $27.98

Based on a 5 year term @ 2.94% and a 25 year amortization

Down payment between 15% and 19.99%
Loan Amount $150,000 $250,000 $350,000 $450,000 $550,000 $850,000
Increase to Monthly Mortgage Payment $7.06 $11.75 $16.46 $21.16 $25.86 $39.96

Based on a 5 year term @ 2.94% and a 25 year amortization

  • During the first nine months of 2016
    • Nearly 50% of CMHC’s transactional mortgage loan business were for loans of less than $300,000
    • Nearly 95% of CMHC’s transactional mortgage loan business were for loans of less than $600,000
    • Less than 1% of CMHC’s transactional mortgage loan business were for loans of more than $850,000
  • CMHC follows OSFI guidelines for federally regulated mortgage insurers in Canada.
  • Calculating the gross debt service ratio (GDS) allows potential homebuyers to estimate the maximum home-related expenses they can afford to pay each month.

GDS = Principal + Interest* + Property Tax + Heat
Monthly Income

*Interest is calculated using the qualifying rate

  • Mortgage loan insurance helps protect lenders against mortgage default and enables consumers to purchase homes with a minimum down payment of 5% with interest rates comparable to those with a 20% down payment. Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price.
  • CMHC’s new premium rates will be effective for new mortgage loan insurance requests submitted on or after March 17, 2017. The current mortgage loan insurance premiums will apply for applications submitted to CMHC prior to this date, regardless of the closing date. As is normal practice, complete borrower and property details must be submitted to CMHC when requesting mortgage loan insurance.
  • The changes do not impact mortgages currently insured by CMHC.

 

Homeowners Grant Increased from 1.2 -1.6 million

General Angela Calla 10 Jan

It’s official.

The B.C. government has announced a hefty increase for the homes owners grant threshold to match the large increase in property assessments in Metro Vancouver

Finance Minister Mike de Jong says the Homeowners Grant is being increased from $1.2-million to $1.6-million, an increase of 33% from last year.

See the full story here: http://www.cknw.com/2017/01/09/homeowner-grant-threshold-will-go-up/ 

What to understand how to use your increased property assesment to your advantage? COnsolidate your debts into your mortgage 

Ccntact us directly to help you at 604-802-3983 or callateam@dominionlending.ca 

Angela Calla, Mortgage Expert, AMP of the Year in 2009 has been helping British Columbian families save money with the best mortgage strategy for over a decade from her Port Coquitlam office location. She is a regular contributor to national and regional media outlets and long time host of The Mortgage Show on CKNW Saturdays at 7pm, and sits on many advisory boards for mortgage lenders & insures. She can be reached directly to help you. 

HOW YOUR CREDIT SCORE AFFECTS YOUR PURCHASE PRICE

General Angela Calla 9 Jan

 

What is a credit report and why is it necessary?Your Credit Score that the lenders use, not to be mistaken by the Credit Risk Score you see when you check your own credit, is one aspect of determining your borrowing power. The better your score, the length of established credit and your payment history the better when it comes to mortgage financing.

Let’s assume that all parts of an application are equal (available down payment, income, monthly liability payments etc.) except for the Credit Score. Established credit in this case would be any credit report that has at least 2 accounts reporting with a limit of $2,000 for 2 Years.

Comparing the credit profiles of Jane and John both who make a gross annual income of $50,000 the following would apply:

First Gross Debt Service Ratio (GDS) is the combined shelter expenses (heat, property tax, half of condo fees & mortgage payment) in relation to the borrowers gross income. And Total Debt Service Ratio (TDS) is the GDS plus all other monthly debt liabilities in relation to the borrowers gross income.

Jane has a Credit Score over 680

  • GDS allowed is 39%
  • TDS allowed is 44%

John has a Credit Score between 600-679

  • GDS allowed is 35%
  • TDS allowed is 42%

Each year Jane may allocate $19,500 towards GDS and $22,000 towards TDS.

And each year John may allocate $17,500 towards GDS and $21,000 towards TDS.

Lets assume heat and property tax combined are $300/month. This means that Jane with her excellent credit can allocate $1,325 towards her mortgage payment and John can allocate $1,158 toward his mortgage payment.

Using the current Benchmark Qualifying Rate of 4.64% to qualify Jane may qualify for a mortgage of $236,066 and John may qualify for a mortgage of $206,313, a difference of$29,735.

As you can see there is quite the difference in mortgage amounts allowed under each credit rating. If you’re thinking of buying it’s best to consult a Dominion Lending Centres mortgage broker who will check your credit, help you determine your maximum mortgage amounts and if necessary help you make credit decisions that may improve your credit score and buying power.

The Angela Calla Mortgage Team is here to help you personally contact us today at 604-802-3983 or callateam@dominionlending.ca 

Getting a Mortgage After Consumer Proposal or Bankruptcy

General Angela Calla 6 Jan

Life can definitely throw some challenging financial situations your way.

As independent mortgage professionals, we can provide solutions and

strategies during or after these challenging times in order to get you back

on track.   We have access to banks, trust companies and mortgage companies

that specialize in this transitional period to help you move forward with

the best mortgage plan for you.  We protect your credit by negotiating with

multiple lenders to find a solution for you.   The best part of all is that

our service is free!

 

If you have never owned a home and have had a consumer proposal, the good

news is that you are already accustomed to the discipline of saving money

every month.  Should you choose to continue to grow your savings, those

funds can then be put toward a down payment and re-establishing credit.  

 

If you own a home already, there are lenders that will help you refinance and pay out your proposal

earlier in order to accelerate your transition period.

 

After bankruptcy, different lenders will issue mortgages based on the amount

of time since you were discharged, the amount of down payment on a purchase

and/or the current equity in your home if your already own.   Lenders then

price their rates based on these aspects of your application.    We look

forward to learning about your journey while protecting your credit and

guiding you through the best strategy on a moving forward basis.   

 

The Angela Calla Mortgage Team is here to help you personally with your mortgage questions 604-802-3983 and callateam@dominionlending.ca 

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