Bank Of Canada Announcement March 1/ 2017
Good morning
As you know, your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate and here is your personal update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.
At 10:00 am EST, Wednesday March 1, 2017, the Bank of Canada again maintained their overnight rate which means no change to your interest rate. This is great news to start the year off as you continue to benefit from low rates which for sure puts a smile on your face as the temperature outside is a little frosty.
Let’s not forget that this is a great time to take advantage of such historical low rates and chat to a financial advisor about a Tax Free Savings Account or some RRSP contributions to trigger a potential income tax refund; you might have missed the RSP deadline for this year but it is never too late to start saving and planning for the future. If you don’t have a financial advisor, let me know and I’d be happy to recommend one to you.
On another note, are you carrying a balance on any lines of credit or credit cards right now where the interest rate is over 3%? If so, this is the perfect time to chat about a potential debt consolidation or refinance especially – let’s start saving you some unnecessary interest and getting to your mortgage burning party sooner! Maybe you are planning a renovation project soon or purchasing a second home or rental property – chat to me about your options … I'd be happy to make those plans into realty.
To continue with the Bank of Canada news, here is an excerpt of the announcement and what they had to say about their decision:
“Overall, recent data on the global and Canadian economies have been consistent with the Bank’s projection of improving growth. In Canada, recent consumption and housing indicators suggest growth in the fourth quarter of 2016 may have been slightly stronger than expected. However, exports continue to face the ongoing competitiveness challenges described in the January Monetary Policy Report. The Canadian dollar and bond yields remain near levels observed at that time. While there have been recent gains in employment, subdued growth in wages and hours worked continue to reflect persistent economic slack in Canada, in contrast to the United States.”
Given the mixed messages of both positive growth versus a slow down in some sectors, it is still anticipated that prime rates won’t start increasing until well into 2017 but we are being given the heads up that they will start increasing eventually. Remember, that any increase to the prime rate since 1992 has only been by 0.25% at any ONE time, so you won’t see a large significant increase all at once.
Fixed rates haven’t changed at all since the last announcement, and are around 2.59% to 2.89% for a five-year fixed term. Also, remember that the prime rates and fixed term rates are impacted by two different sets of economic drivers and so increases in fixed rates doesn’t always mean the same increase in prime rates and vice versa.
Based on this recent announcement, and the anticipation that the prime rate will still remain low for a while now, unless you feel otherwise, I’d recommend that you remain with your current variable rate product as the interest is still lower than a fixed term rate right now. However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you. I’ll be in touch again for the next announcement on April 12, 2017.
I wonder if I can ask a favour, if you hear a friend or family member talk about going thru a financially tough time – maybe I can help with some budgeting, credit counselling and debt consolidation options for them. It is also that time of year that many think about what they want to accomplish this year – if buying their first home is on the “wish list”, would you mind passing my contact information on to them – this is very much appreciated.
This is why mortgage rates are suddenly way more complicated.
This is why mortgage rates are suddenly way more complicated.
If you’ve been shopping for a mortgage lately, you’ll have figured out that rates can be all over the map. That’s because you’re not comparing apples to apples anymore. Thanks to new mortgage rules, the mortgage pricing matrix is much more complicated, and quick online mortgage quotes are less reliable. That’s why it’s important to have a basic understanding of the mechanics behind mortgage rates. Here’s a quick guide:
Variable mortgages and lines of credit hinge on the Bank of Canada’s “overnight rate”. Eight times a year the Bank of Canada determines if they are changing this rate. While they may hold the rate, they will increase it when the economy strengthens and inflation is a concern, and decrease it if they need to get the economy moving. It’s a careful balance. The chartered banks base their prime lending rate on this overnight rate because it influences their own borrowing. So if the central bank changes the overnight rate, it’s sending a signal to the banks to change their prime rate, which in most cases they will, passing on some or all of the change to their variable/line of credit clients.
Fixed-rate mortgages are different. Lenders use Government of Canada bonds to establish pricing for fixed-rate mortgages so you need to watch bond yields to determine where fixed mortgage rates are heading.
Whether it’s a fixed or variable-rate mortgage, the new mortgage rules mean lenders now have different rules and rates for insurable vs. uninsurable mortgages. If a mortgage is insurable, it will qualify for the best rates. Most homebuyers know that if they have less than 20% downpayment, they need to pay for mortgage insurance as a way to protect the lender. In order to obtain the lowest cost of funds, some lenders use this insurance to insure mortgages with more than 20% equity.
Mortgages that are “uninsurable” can include rental properties and second homes, switch mortgages that move to another lender, 30-year amortizations, refinance mortgages, mortgages over $1 million, and even some conventional 5-year mortgages. These mortgages are charged a rate premium and some lenders no longer offer them. Additionally, interest rate surcharges are often charged if it’s difficult to prove your income or you have bad credit, the property is in a rural location, you want a long rate hold, you want the best pre-payment privileges and porting flexibility, and you don’t want refinance restrictions. As a result, be wary of rates you see online, because you might not qualify for them.
Without a doubt, insurable vs. uninsurable has made the mortgage landscape significantly more confusing. Getting good solid advice is critical, and Mortgage Brokers have never been more important in the home financing process. I have access to all the lenders I need, and the experience and knowledge to get you the best mortgage for your situation. I am here to help you!
Getting your home in 5 easy steps
Getting your home in 5 easy steps
- Meet with your Mortgage Broker
This important first step is where I get to know you, not just your plans for your new home, but also your goals for the future. I can also offer advice on boosting your credit rating so you are eligible for the best possible mortgage rate, and will outline the extra costs that come with buying and maintaining a home. Be sure to bring all of your questions!
- Know your purchasing power and buy your home!
Before you start house shopping, I can make sure you have a good idea of the amount of mortgage you can qualify for based on your downpayment, income, assets/liabilities, and credit score. This way you’ll know how much it will cost you to carry the mortgage, and both realtors and sellers will know you're serious. Now, go house shopping. Let me know if you need a realtor partner. Congratulations, you’ve bought a home!
- Get your mortgage
Your mortgage amount will be finalized based on your purchase price. I will submit your application to the selected lender and advise you of the documentation you need to support your mortgage request. Your lender may need an appraisal of the property. We’ll then receive a commitment from the lender, which includes the mortgage details and any conditions. You’ll need to make sure the conditions are met and forward any additional required documents. Once you have your approval, you can waive your financing condition if you had one.
- Prepare for the big move
Your lender will send your mortgage information to your lawyer. Please let me know if you’d like to be referred to one of my lawyer partners. Approximately 10 days prior to the closing of your home, you’ll meet with your lawyer to provide identification and your remaining downpayment, sign all of the documents that relate to your new home, and review your closing costs. Then everything will be in place for your completion date!
On the day you take possession of your home, your mortgage funds are sent by your lender to your lawyer. Now you can move in and begin enjoying your new home! And thank you for your confidence and trust! The right mortgage is always a great beginning on a smart financial plan for your future.
Did you know...
Did you know...
You can still use the following sources to purchase a home with 5% down payment instead of the traditional savings accounts
- Unsecured Line of Credit
- Credit Cards
- Personal Loans
Mortgage Transfers: You can still transfer your existing insured mortgage to another financial institution with remaining amortizations greater than 25 years. Existing term and amounts can not be increased
New to Canada: There are many options for new to Canada individuals to obtain financing on a new home purchase.
- People who work on Visa’s and landed immigrants who are employed
- If you have been employed for a minimum 3 month period you can qualify for up to 95% financing on your new home as long as you can provide proof of strong international credit reports OR can provide 1 year of timely payments on 2 alternative sources like cell phone, utilities, rent, cable etc… You can only borrow against a residence that will be your primary home.
- With 5% down the funds must be from non-borrowed sources which will require 90 days bank statements to show the accumulated savings/investments. The lender wants to confirm that any large deposits can be properly tracked to the source.
- We would also need to see a letter of employment, most recent pay stub and confirmation of landed status.
- Non-landed immigrants who are employed
- If you have been employed for the minimum 3 month period and can meet the same credit guidelines as above you can qualify for up to 90% financing on your primary residence. Keep in mink you are limited to purchases only (not refinancing) and to a single unit primary home. You may also need to show that you have at least applied for landed status.
- New immigrants who are not yet working but have applied for, been granted, or have landed immigrant status
- If you are not employed and have applied, been granted or have secured landed status you can still borrow between 65% and 75% of the value of a home (provided of course that you can still show strong credit from example above) As an additional condition, the banks will also want to see that you have liquid assets equal to at least 6 months of mortgage principle, interest and property taxes. If you are wanting 75% financing you must be able to show additional liquid asset equal to 25% of the purchase price of the home (once again, this is only for a primary residence)
Be sure to educate yourself. Work with someone who will teach you about your options to ensure that you are getting the proper advice. Blind trust can be a very expensive mistake. We are here to make your first experience with Canadian mortgages a very positive one!
Why Mortgage Before March 17?
Why Mortgage Before March 17?
If you’re in the market for an insured mortgage, then you might want to get that mortgage before March 17.
Canada Mortgage and Housing Corporation (CMHC) is raising premiums for insuring mortgages on Canadian homes for the third time in three years. Canadian homebuyers are required to have mortgage insurance if they have less than a 20 per cent downpayment. The insurance provides protection for the lender in the case of a default.
How will it hit your wallet? The increase is not too significant for those making the minimum downpayment required. A homebuyer with a $250,000 mortgage and a 5 per cent downpayment will only pay about $5 per month more in insurance premiums. I can calculate exactly how much the increase will mean to you if you get your mortgage approval on or after March 17.
The increases are actually more substantial for larger downpayments of 15 per cent or more. Those with 20 per cent or more downpayment aren’t required to have mortgage insurance, although it’s used by lenders that securitize their mortgages. As a result, any increased cost will likely be passed on to customers through higher rates.
Premiums are also increasing for “non-traditional” insured mortgages i.e. home buyers with borrowed downpayments, a type of mortgage downpayment that could grow in popularity as homebuyers strive to gain entry in the housing market.
The premium change will come into effect on March 17. Homebuyers will be able to access the current lower rates if they have bought a home and are approved before the March 17 deadline, even if they have a later closing date.
If you are looking to buy, get in touch today!
Surviving and Thriving: Your Mortgage Blueprint for 2017
Your Home & Mortgage
January 2017
Surviving and Thriving: Your Mortgage Blueprint for 2017
Canadians are definitely talking about the housing market – what do the new mortgage rules mean, is this the right time to buy, have mortgage rates bottomed out, is a lender’s renewal offer the best available, and on and on! For many, it feels like some uncertain times ahead. Often it’s just a few sensible strategies that can help you survive and thrive in the current climate:
- Take care of your credit. It’s so important to have good credit behaviours so you always qualify for the best mortgage rate. Pay your bills on time. Don’t let your credit accounts exceed 50% of the credit available. Before you cancel any credit cards, get advice. And don’t apply for a store card just to save on your purchase that day!
- Let renters help pay your mortgage. A home with a rental suite can be a great option for homebuyers, especially if the area you love is pricey or you don’t want to buy a condo at a lower cost. It’s also a great option for existing homeowners looking to lower their mortgage payment.
- What’s the prepayment penalty? If you ever need to get out of your mortgage early, the right mortgage could save you thousands! Not all lenders calculate penalties the same way, and the differences can be substantial. It helps to know which lenders have the most fair prepayment penalties and I’ve got that information at my fingertips.
- Choose low-interest debt. Whatever your need might be – paying down high-interest debt, funding education, a large purchase, investments, or renovations, your mortgage might be your most cost-effective financing option, if you have enough home equity.
- If you bought your first home in 2016 you may be able to take advantage of the $5,000 non-refundable Home Buyer Tax Credit amount, which provides up to $750 in federal tax relief. Not sure if you qualify, ask!
- Renovate over relocate? The right renovation might be all it takes to turn the house you’re in, into the home of your dreams. It is almost always less expensive to renovate than to relocate! I have great renovation financing options if that’s where you’re heading!
- Renew with your eyes open. When your lender sends out a letter suggesting you renew your mortgage at their current offer, get advice. Don’t renew with your eyes closed! This is your opportunity to negotiate the best possible deal!
- Speed up your mortgage pay-down. Change from monthly payments to weekly or bi-weekly payments. Or take your tax refund and put it against your mortgage principal. Your interest costs will go down with every dollar you’ve reduced on your principal.
- Don’t neglect your savings. In managing debt, you want to make sure you don’t need to use credit to get you through a financial emergency when your car breaks down or your washing machine quits. Make a point of setting aside a small sum every paycheque into a special emergency fund.
And lastly, it’s always a good idea to get expert mortgage advice well in advance of buying your home, and then always on an annual basis. So take the time to meet with your mortgage broker and get your blueprint for surviving and thriving in 2017.
Bank Of Canada Announcement January 19 2017
Firstly, a very Happy New Year to you and your family – if one of your New Year’s Resolutions was to get back on track with your financial goals and wealth growth plans, now is a perfect time. This is the first of many announcements this year about interest rate changes that will impact a majority of your current and future debt – from mortgages and lines of credit to credit cards and personal loans. My New Year’s Resolution to you is to help ensure that the impact of interest rate changes to you is minimal – advising you on ways to have more of your hard-earned cash stay in YOUR pockets and doesn’t line someone else’s – saving you thousands in unnecessary interest along the way – imagine what you could do with an extra $5,000 or $6,000 this year?
You may have already heard that the impact of recent mortgage legislation and qualifying changes has already impacted the borrowing power of many home buyers and owners, and we have also seen fixed term rates rise slightly. Just today one of the default insurers, CMHC, announced that they will be increasing their default insurance premiums effective March 1, 2017 – this typically only impacts those with less than 20% down payment. Now, more than ever, the benefits of receiving a pro bono consultation from your mortgage broker is key to ensuring you make the right decision on your biggest financial obligation while protecting your biggest asset – your income!
This communication is going to focus on what the Bank of Canada had to say today and how that impacts you – reach out to me for a pro bono consultation on what we can do now to meet your 2017 financial wealth and freedom goals and start to save you some unnecessary interest.
As you know, your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate and here is your personal update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.
At 10:00 am EST, Wednesday January 18, 2017, the Bank of Canada again maintained their overnight rate which means no change to your interest rate. This is great news to start the year off as you continue to benefit from low rates which for sure puts a smile on your face as the temperature outside is a little frosty.
Given the assumptions the bank made in its forecast, they are expecting an upward swing in economic growth in 2017 anticipating to reach full capacity by mid-2018. It is still anticipated that prime rates won’t start increasing until well into 2017 but we are being given the heads up that they will start increasing eventually. Remember, that any increase to the prime rate since 1992 has only been by 0.25% at any ONE time, so you won’t see a large significant increase all at once.
Fixed rates have increased slightly since the last announcement, and are around 2.59% to 2.89% for a five-year fixed term. Also, remember that the prime rates and fixed term rates are impacted by two different sets of economic drivers and so increases in fixed rates doesn’t always mean the same increase in prime rates and vice versa.
Based on this recent announcement, and the anticipation that the prime rate will still remain low for a while now, unless you feel otherwise, I’d recommend that you remain with your current variable rate product as the interest is still lower than a fixed term rate right now. However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you. I’ll be in touch again for the next announcement on March 1, 2017.
On closing, I wonder if I can ask a favour - you might know someone who is unfortunately having a tough time right now with maybe too much debt or recent loss of income. There are many options to help using debt consolidation or access to some funds to get thru the tough times using the equity in their home. I have found recently that my access to alternative funds with lenders that have very flexible qualifying guidelines, has been able to help many who are in transition and/or just need enough money to get them thru a tough time like finding a new job, keeping above water and feeding their family in the meantime. Don’t hesitate to ask them to reach out to me – I can provide a pro bono consultation to get them thru this.
INCREASE IN CMHC INSURANCE FEES
CMHC is increasing its homeowner mortgage loan insurance premiums as a result of our regular review of insurance products and to reflect the new OSFI Capital Requirements for Federally Regulated Mortgage Insurers that came into effect on January 1, 2017.
The new premiums are effective March 17, 2017 and will result in an increase of approximately $5 to the monthly mortgage payment of the average CMHC-insured homebuyer. The premium schedule is as follows:
| Standard Premiums | ||
| Loan-to-Value Ratio | Total Loan Amount | Increase to Loan Amount |
| Up to and including 65% | 0.60% | 0.60% |
| Up to and including 75% | 1.70% | 5.90% |
| Up to and including 80% | 2.40% | 6.05% |
| Up to and including 85% | 2.80% | 6.20% |
| Up to and including 90% | 3.10% | 6.25% |
| Up to and including 95% - Traditional Sources of Equity - Non-traditional Sources of Equity |
4.00% 4.50% |
6.30% 6.60% |
Note: for purchase/new construction loan applications, the premium rate is applied to the Total Loan Amount. For portability loan applications, the premium is the lesser of: the rate applied to the Increase to Loan Amount; or the premium rate applied to the Total Loan Amount.
- CMHC’s new premium rates will be effective for new mortgage loan insurance requests submitted on or after March 17, 2017.
· CMHC’s current premium rates will apply for applications submitted to CMHC prior to March 17, 2017 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.For more information on the new premiums, visit cmhc.ca or contact your CMHC National Key Account Manager or Regional Manager, Client Relations.
Record average sale price caps off historic year for Ottawa real estate market
Ottawa’s real estate market set another record in December as the average resale price surpassed $420,000 for the first time, according to realtor statistics.
(Stock image)
The previous record was $411,791, set in May 2015, according to OBJ records.
The Ottawa Real Estate Board, which released its December statistics Thursday, attributed the increase to a higher concentration of homes sold for more than $500,000.
Before it was even over, 2016 was guaranteed to be a record-setting year for Ottawa’s real estate market.
By November, local realtors had already set a new high for the number of homes sold in a single calendar year.
That didn’t stop the industry from ending a year with a bang by selling 715 homes in December, a new record for the month.
In total, Ottawa realtors sold 15,537 homes last year, a six-per-cent increase over 2015. The previous five-year average was 14,232 sales, according to OBJ records.
“No matter what is said in the history books about 2016, it proved overall to be a great year for Ottawa real estate,” said OREB president Rick Eisert in a statement. “The monthly unit sale performance in 2016 was often bolstered by a strengthened condo market which recorded increases over 2015 for much of the year.”
Source: http://www.obj.ca/Real-Estate/Residential/2017-01-05/article-4714483/Record-average-sale-price-caps-off-historic-year-for-Ottawa-real-estate-market/1
Average 5 year 8.70% since 1957
If you are looking for some amazingly low rates but are feeling a bit blue about the small increases lately; this will be sure to brighten your day!
You are still able to get a 5 year mortgage starting at 2.49%!!!! The historical average since 1957 is a whopping 8.70%! So lets talk numbers! On a mortgage of 300,000, you would be looking at a difference of $89,000 in interest OVER 5 YEARS!!!! Yes, I said EIGHTY NINE THOUSAND DOLLARS!!!!
If you want to look at that in terms of coffee, that would by you 52,352 mediums! Or, over the 5 years, you could buy 28 medium coffees every single day!
So yes, in short not only are rates so low in comparison to the average since 1957, they are SO LOW that you could get 5,740mg of caffeine EVERY DAY...or save $89,000 over 5 years. The choice is really up to you.