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

Clarification on Qualifying Interest Rate

On February 16th, the government announced new parameters regarding the application of the government guarantee supporting the mortgage insurance industry, but did not stipulate the rules around qualifying interest rates. Effective April 19th, 2010, the qualifying interest rate used to assess borrower eligibility will change only for loans with an LTV greater than 80% as follows.

Fixed-Rate & Variable-Rate Mortgages

For loans with a fixed-rate term of less than five years and for all variable-rate mortgages, regardless of the term, the qualifying interest rate is the greater of:

• The benchmark rate
• The contract interest rate

For loans with a fixed-rate term of five years or more, the qualifying interest rate is:

• The contract interest rate

Mortgages with Multiple Interest Rates (eg, Multi-Component Mortgages)

Each component must be qualified using the applicable criteria defined above.

CMHC defines the benchmark rate as the Chartered Bank – Conventional Mortgage Five-Year rate that is the most recent interest rate published by the Bank of Canada in the series V121764 as of 12:01am (ET) each Monday, which can be found at: www.bankofcanada.ca/en/rates/interest-look.html

CMHC Self-Employed Policy Changes

CMHC Self-Employed Policy Changes

Mortgage loan insurance applications submitted to CMHC on or after April 9th, 2010 will include different criteria for self-employed borrowers without traditional third-party validation of income.

CMHC is reducing the maximum LTV for the Self-Employed Product Without Third-Party Validation of Income as follows:
For purchase and portability transactions, the maximum LTV is being reduced from 95% to 90%
For refinances, the maximum LTV is being reduced from 90% to 85%
The CMHC Self-Employed Product Without Traditional Third-Party Validation of Income is intended for self-employed borrowers who have difficulty providing documentation for their current income level. Typically, these are borrowers who recently became self-employed.

Accordingly, self-employed borrowers who have been self-employed in the same business for more than three years will not be eligible under this product. CMHC continues to require that the borrower have a minimum of two years of experience in the same field. This can include time spent working as a non-self-employed worker in the same field.

As CMHC has found that commissioned income can be relatively easily substantiated, borrowers who earn income through commission will no longer be eligible for the CMHC Self-Employed Product Without Traditional Third-Party Validation of Income.

New Canadian Mortgage Rules to Come into Force April 19th, 2010

Federal Finance Minister Jim Flaherty announced changes to mortgage insurance rules which are set to come into force on April 19th, 2010.

This means the government will adjust the rules for government-backed insured mortgages as follows:

1) 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.

2) Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90% from 95% of the value of their homes. This will help ensure home ownership is a more effective way to save.

3) Require a minimum down payment of 20% for government-backed mortgage insurance on non-owner-occupied properties.

There were no changes to down payment requirements or length of amortizations for owner-occupied residences.

Click here for additional details on the changes.

DLC supports the Government's measures as a prudent and balanced approach.

We've seen a rise in consumer debt and we anticipate interest rates will go up in the future, so it makes sense to put policies in place early to protect consumers.

These changes will help moderate the market without being too severe. They help protect first-time home buyers.

Budgeting Towards Homeownership

Transitioning from renter to homeowner is one of the biggest decisions you’ll make throughout your lifetime. It can also be a stressful experience if you don’t plan ahead by building a budget and saving prior to embarking upon homeownership.

Budgeting is a core ingredient that helps alleviate the stress associated with money issues that can sometimes arise if you purchase a home without knowing all of the associated costs – including down payment, closing expenses, ongoing maintenance, taxes and utilities.

The trouble is, many first-time homeowners fail to carefully think about their finances, plan a budget or set savings aside. And in this society of instant gratification, money problems can quickly escalate.

The key is to create a realistic budget based on your goals. Track your spending and make your dollars go further by sticking to your budget once it’s in place. Budgeting offers a step-by-step formula for figuring out how to best save your hard-earned money to invest in homeownership.

Start by listing your household income, then your household expenses, and review your spending habits. All of this can be done on a pad of paper or on a computer spreadsheet.

Keeping receipts for everything that you purchase will enable you to accurately keep track of where your money is going each month so that you can review and make necessary changes to your plan on an ongoing basis.

Examine all areas of your life from entertainment to the type of food you buy, where you buy your food and clothes, and how and where you travel. Also look at your spending personality and make necessary adjustments. Are you a saver, a splurger, a spontaneous shopper or a hoarder? Become smarter with your money and avoid impulse buying.

If you find you’re spending a lot of money in one area, such as entertainment for instance, set aside a reasonable amount each month and prepare to stop spending money in this area once your budget has been exhausted.

Budgeting provides you with the opportunity to re-evaluate your needs and wants. Do you
really need the magazine subscriptions, the gym membership and all the other things you may spend money on each month? Although everyone needs some “me time” to wind down, could you not get that by taking a walk or reading a good book you borrowed from the library?

If you can set your budget solidly in place before you head out home or mortgage shopping, you will be far more prepared to purchase your first home.

Following are three top tips to help you prepare for the purchase of your first home:

1. Set up a savings account. You can deposit a predetermined amount into this account each pay period that you will not touch unless it’s absolutely necessary. This will enable you to put money aside for a down payment and cover closing costs, as well as address ongoing homeownership expenses such as maintenance, taxes and utilities.

2. Save up for big-ticket items. As you accumulate money in your savings account, you will be able to also save for specific purchases to help furnish your home – avoiding the buy now, pay later mentality, which can have a negative impact on your credit when you’re seeking mortgage financing.

3. Surround yourself with a team of professionals. When you’re getting ready to make your first home purchase, enlist my services as a licensed mortgage professional and find a trusted real estate agent. Experts are invaluable to you as you set out on the road to homeownership because we help first-time buyers through the home purchase and financing processes every day. Experts can answer all of your questions and set your mind at ease. I have access to multiple lenders, and can help you get pre-approved for a mortgage so you know exactly what you can afford to spend on a home before you head out house hunting, while a real estate agent will be able to match your needs with a house you can afford. Both parties will negotiate on your behalf to ensure you get the best bang for your buck. And, best of all, these services are typically free. Experts will also be able to refer you to other reputable professionals you may need for your home purchase, including a real estate lawyer and home appraiser.

[Source - Dominion Lending Centres]

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Visit my website: www.gregbarrow.ca, there you will find helpful mortgage calculators to help out with your budgeting. Also please feel free to call if you would like to get together in person to get your budgeting started.

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