New Mortgage Rules Take Effect

New mortgage rules take effect in Canada today. I outlined them in a prior post here:

http://ontariomortgageinfo.blogspot.com/2010/02/new-canadian-mortgage-rules-to-come.html

Please note the new Bank of Canada benchmark rate for qualifying variable rate mortgages and 1-4 year terms is currently 5.85%.

Please call or email me if you have any questions regarding the new rules.

Mortgage Renewal Shopping

While most Canadians spend a lot of time and expend a lot of effort in shopping for an initial mortgage, the same is generally not the case when looking at mortgage term renewals. Omitting proper consideration at the time of renewal costs Canadians thousands of extra dollars every year.

It’s important to never accept the first rate offer that your existing lender sends to you in the mail around renewal time. Without any negotiation, simply signing up for the market rate on a renewal will unnecessarily cost you a lot of extra money on your mortgage.

It would be my pleasure to have the lenders compete for your mortgage business at renewal time to ensure you receive the best mortgage options and rate catered to your specific needs. After all, just because a lender had the best available product or rate for you when you obtained a mortgage one, three or five years ago does not mean the same holds true in today’s market.

With products and rates changing on an ongoing basis, you can’t possibly know what the best offering is for your unique situation without having me – a mortgage professional – do some investigating on your behalf.

It’s my job to look at every rate and product change from each lender – including banks, trust companies and credit unions – every morning to ensure I find the best deals for my clients. I also have the inside scoop on specials available through dozens of lenders thanks to the large volume of business I fund through these lenders each year.

Often times, your existing lender will send a highball renewal rate to their existing clients in the hopes that you will simply sign the renewal form and send it back. Your best bet is to come to me prior to your renewal date or forward the lender’s renewal offer to me before signing anything. That way, you can rest assure you’re getting the best possible mortgage product and rate that suits both your current and future mortgage needs.

New CMHC rules for self-employed borrowers take effect today

The new CMHC rules for self-employed borrowers take effect tomorrow and pose new challenges for this category of client.

First off, self-employed borrowers with more than three years in the same business who apply for a mortgage using stated income, as well as commissioned-income borrowers, are now required to provide to provide traditional proof of income (or "third party validation") through documents like financial statements, contracts and T4s.

Those who have recently become self-employed and don't have third-party validation can still apply for a mortgage, but have to come up with a 10 per cent down payment instead of five per cent. Refinancing will also be cut to 85 per cent loan to value instead of the previous 90 per cent.

Brokers have been giving the rule changes mixed reviews. Mark Fidgett, owner of Verico Notapennydown.com said the latest move was "off the wall" and hopes that if enough people talk about their displeasure with the changes, the CMHC might alter its decision. "I don't think this was a good decision - it doesn't make sense now," he said, adding it also makes writing off income for tax purposes more difficult for BFS clients.

Dominion Lending Centres broker Stephen Gilmour, on the other hand, agrees with CMHC's decision.
"The more people who default on loans, the worse the market becomes," he said, noting he felt a lot of self-employed people have qualified for mortgages when they shouldn't have. "This provision for self-employed is going to put the right people in the right structure of home."

Read the comments on this article here: http://www.mortgagebrokernews.ca/news/43649/details.aspx

Canadian Mortgage Industry Headlines

From Dominion Lending Centres Weekly Bulletin - Industry News Highlights]

Mortgage Application

Mortgage fraud may not be the most serious crime in the grand scheme of things, but it’s not something the government should be helping. But that’s exactly what real estate professionals say is a likely result of the new mortgage rules being put into place on April 19th.

“There’s going to be a dramatic increase in mortgage fraud again,” says Don Campbell, President of the Real Estate Investment Network (REIN), a Calgary-based association of investors who collectively own more than $3 billion in property. “You watch this thing start to take off.”

The reason? It’s virtually impossible for investors to buy a third rental property without putting 20% down because the new CMHC rules use a 50% add-back policy instead of an 80% offset for rental income. Essentially, that means investors get less mileage from the rent that is typically used to pay off the mortgage.

The more difficult financing multiple properties beomes, the more tempting it is to cheat the system. One way to get around the rules is to not claim properties as investment vehicles.

“People are going to start signing documents and say, ‘Ah, yes, I’m moving in,’ or ‘This is my principal residence,’ just to get a mortgage that doesn’t require 20% down, but is 5% down,” says Campbell.

Click here to read more in the Financial Post.

Continued low interest rates and quickly rising home prices are helping encourage those who have been on the fence about buying their first home to go ahead and take the plunge.

But according to a TD Canada Trust poll of female homeowners, there are a number of things that they wish they’d known before they bought – for example, 25% said they’d wished they’d researched their mortgage options better.

“Whether you choose a variable-rate or a long-term fixed interest rate mortgage will depend on your comfort with interest rate fluctuation and your ability to carry a higher mortgage payment if interest rates rise,” says Chris Wisniewski, the bank’s group product manager for real estate secured lending.

“As anticipation about rising interest rates grows, more women may be interested in exploring longer-term fixed interest rate mortgages. Either way, it’s important to consider all options early because once you put in an offer, things will move very quickly.”

Click here to read the full story in The Province.

The honeymoon isn’t exactly over, but the partners – new home buyers and low mortgage rates – drifted apart a bit last week as seven major Canadian banks raised their posted rates.

The increases reflect a strong bond market, with the key five-year closed rate affected the most, rising 0.6% to 5.85%.

It means a homeowner taking the new rate will see monthly payments on a $250,000 mortgage rise to $1,577, up from $1,489 – an increase of $88 per month.

The rate increases come three weeks before new federal government regulations on minimum mortgage qualification requirements come into effect April 19th.

Click here to read the full Calgary Sun article.

According to the March RBC Canadian Consumer Outlook Index, most Canadians (65%) are losing sleep over their finances. More than one-in-four Canadians (27%) are up at night worrying about paying off their debt, followed by nearly one-in-five (18%) who worry about having enough for retirement and 16% who worry about having no emergency fund.

The survey also found that one-in-three (34%) were not confident about any aspect of their financial situation.

More Canadians believe the national economy will worsen over the next 12 months (20% in March compared to 13% in February). Similar to February’s findings, Canadians are still divided on the overall state of the economy, but the balance remains in positive territory with 54% of Canadians believing the economy is good and 46% describing it as bad.

Overall, the March RBC Canadian Consumer Outlook Index remained virtually flat at 108 points, down from 109 in February, suggesting Canadians see the overall economic recovery as a bumpy road ahead.

Click here to read more about the RBC index.

RBC, Canadian Banks raise rates on fixed mortgages

Royal Bank, TD Canada Trust and Laurentian Bank announced Monday they are raising rates they charge on certain fixed mortgages, including the benchmark five-year mortgage, which will jump 60 basis points to 5.85 per cent effective Tuesday.

"This is actually a fairly large increase reflecting what's happening in the bond market lately," said Benjamin Tal, senior economist with CIBC World Markets.

Most other lenders will likely follow. These are the largest posted rate increases since 1996.

"The rates are tied to our funding costs, which change day to day," said an RBC spokesperson. "Our long-term funding cost has gone up significantly since December." (Globe story)

If your are thinking of buying or refinancing in the near future, contact your mortgage agent soon to obtain a pre-approval or to get a rate hold!

Self Employed Mortgage Solutions

If you’re self-employed, you may have a more difficult time obtaining financing for your real estate purchases than you encountered prior to the credit crisis thanks to tighter lending criteria in lieu of the recent recession. But if you can prove your income, show you’re up-to-date on your taxes and that you have solid credit, your chances are greatly improved.

There are essentially two types of self-employed or business-for-self (BFS) borrowers – those who can prove their income and those who cannot, and must instead use a stated-income mortgage product.

By providing the required documentation, you’re much more likely to be approved for a mortgage if you qualify based on your income. The trouble is that if you cannot prove your income, you pose a higher risk in the eyes of lenders. In mortgages, as in most other things, pricing is based on risk – the riskier the lender perceives you as a borrower, the higher the interest rate you will be required to pay on your mortgage.

Canada Mortgage and Housing Corporation (CMHC) offers default mortgage insurance for BFS clients through a stated-income mortgage product up to 95% loan to value (LTV) – meaning the down payment can be as low as 5% of the purchase price – but the income has to make sense based on your occupation. This is important, because the chances of finding lenders to fund this type of deal are significantly boosted if the mortgage is insured.

Lenders and insurers are well aware of the tax write-offs that BFS borrowers can leverage, but these deals are accepted or declined based on average incomes for specific fields, as well as your credit rating. It pretty much goes without saying that those with credit blemishes will have a tough time obtaining traditional mortgage financing if they’re self-employed.

Getting pre-approved
While BFS mortgage financing is viewed on a case-by-case basis, if you work with me to obtain a pre-approval, you can be confident you have access to mortgage financing and you will know how much you can spend before you head out shopping for a property.

It’s important to note, however, that there is a significant difference between being pre-approved and pre-qualified. In order to obtain a pre-approval, the lender fully underwrites the deal, whereas with a pre-qualification only the most basic details are considered.

Should a pre-approval and/or mortgage default insurance be unobtainable, the maximum mortgage amount you are likely to qualify for is between 50% and 75% – meaning you will need a much larger down payment.

Alternative financing
If you do not qualify for traditional financing all is not lost, since you may be eligible for alternative – or private – funding.

As a mortgage professional, I also have access to private investors who are willing to lend money to BFS individuals looking to obtain mortgages. Although you will pay a higher interest rate, this route may enable you to acquire funds to purchase a home.

Private financing is equity based, meaning that the lender’s decision will be based on a specific piece of real estate as opposed to just focusing on your credit score. Private lenders want to know that the property is marketable and that they will be able to easily sell it should the mortgage go into foreclosure.

When you get into the private-lending realm, not only are the rates higher, but the mortgage terms are also shorter – typically for 12 months at a time. If you do end up in a private mortgage, your goal should be to build up your credit so you can head back to a traditional lender within 12 months – where you will receive better interest rates and, overall, more mortgage options.

I can build a step-by-step plan and guide you through the process of building your credit to get back into traditional financing as soon as possible.

Premier tips his hat

Ontario Premier Dalton McGuinty shares a laugh with Richmond Hill Chamber of Commerce chairperson David West (right) and Dominion Lending Centres Mortgage Agent Greg Barrow prior to the Richmond Hill Chamber of Commerce’s business achievement awards Wednesday night at the Sheraton Parkway Hotel. Mr. McGuinty was the keynote speaker at the awards ceremony.
Staff Photo/Steve Somerville

Read Full Article: http://www.yorkregion.com/news/article/626629--premier-tips-his-hat