Interesting how the more things change, the more they stay the same…
The Baby Boomer generation is growing older and many of them are sitting on huge amounts of equity in their homes, yet their retirement planning may not have kept pace with their cost of living. Many are living longer than ever before, but what kind of life do they have? Others are living ok, but are unable to help their kids or Grand kids they way they would like to. House rich and money poor comes to mind.
Many of these people may have a great relationship with their bank (“I’ve dealt with the X Bank for 50 years!, they look after me!”), yet no longer qualify for lending from that very bank due to the recent changes in mortgage rules.
New solutions to this problem are required, and they are appearing.
In the past we used to try to setup lines of credit secured to the home as a means to give people more control and access their equity. We still do this for some, however, now we have access to a specific lender who does nothing but 55 plus mortgage lending. They have numerous programs including;
- downsizing & financing; Now seniors can sell their current home, buy their smaller home and instead of using all of their equity to pay cash for the home, take out a mortgage which has optional payments. Meaning their cashflow is in their control again.
- Equity takeout of their current home; help their kids with an eto of their residence, or keep the cash for themselves. Payments again are optional making cashflow easier.
- Monthly cash out payment to improve their cashflow with no repayment until they sell.
These are only 3 of the many options available. The best part? Approval is based only on their age and property…no income or credit verification required.
More details here; Reverse Mortgage Myths
We can help you review this program for yourself or your parents/grandparents.
Michael Anthony Lloyd
The Big Banks didn’t get to be Big without thinking about every angle they can bring in more profit. Another detail you will likely be unaware of is the new “Collateral Charge” which looks shiny and nice on the outside, but much like the Hotel California, “you can check out, but you can never leave!”
Well, you can leave, but it will cost you.
This charge is sold on the benefit that if the client ever wants to borrow more money, they can simply go to the branch and they will use this collateral charge to secure those funds against your home instead of having to get a regular loan or refinance their mortgage (saving legal fees). The trouble is other lenders won’t allow you to transfer your mortgage from that lender due to this charge, so then you will have to go to the lawyers and refinance…in other words, the Bank is trying to make it more difficult to leave, lessening your negotiating power.
There is a great article here discussing it in depth: Pros & Cons of Collateral Mortgages
As always, there is much more to talk about than just the rate of a mortgage.
Michael Anthony Lloyd
One of the biggest mistakes Canadians make on a regular basis is judging mortgages strictly on the lowest rate…this is one of the least important aspects of a mortgage in fact. For those who watch the netflix show “House of Cards” it is in the details of the mortgage where the real gain or loss will occur.
For example, did you know that all of the major banks have made dramatic changes to how they calculate their mortgage penalties on fixed rate mortgages? In the past they would merely work out what they would lose between your locked in rate and the current “going” rate and you would pay the difference on your mortgage balance. While this calculation was always murky and hard to nail down to the exact dollar, it was generally understood by most Mortgage Experts at least. Now the “Big Five” have figured out a quiet way to make sure their profits are maximized. By retooling the calculation they have maximized their returns on all of these penalties…and the majority of mortgage borrowers have no idea.
For a detailed discussion on how these penalties work click here Bank Penalty article G&M
With the average mortgage term in Canada only lasting about 3 years before we break the term, this alone will have a massive impact on Canadians…yet the first question people always ask is “What’s your best rate?”
We do have ways around this situation…more soon.
Michael Anthony Lloyd
Many times purchasers will find a home that almost meets what they want, but needs just that little bit extra, from paint & carpet, to finishing a basement, to adding a suite, to modernizing a kitchen or bathroom…we’ve all seen it! The problem is that with most Canadians having put all or most of their money into the down payment for that house, they can’t afford to make those changes. At the very least they may have to wait to save up to make them. We have come up with a solution for this very situation…The Canadian Home Renovation Plan or CHRP! We are able to have your additions/upgrades/changes added to the mortgage so that you can make the changes you want now, and have it included at the same low rate as the mortgage, keeping your cash flow low and your new home satisfaction high! You won’t need an expensive unsecured Line of credit, credit card or loan…this money will be financed with your mortgage. Approved by CMHC, Genworth & Canada Guaranty, Canada’s three Mortgage Insurers to the Banks and lenders, this is a real program you can take advantage of now.
Check out a sample report from one of our Pre-approved homes: click here We work with a select group of Realtors and Mortgage Brokers across Canada to bring this to all Canadians. For more information please fill this in:
Holiday bills looming in the mail?
The holidays can really start to add up; vacations, dinner, gifts, that new PlayStation 4, that Spa day. It happens! So why pay up to 29% interest on your debts, when you could pay your credit card debts off with the lowest rate possible by refinancing your mortgage!
Refinancing your mortgage opens up the possibilities to:
Here are 3 tips to make it happen:
1. Repair your credit – Follow our 6 Simple Secrets to Better Credit check list, and make sure you are still on track to refinance! Low-income borrowers aren’t the only ones who can run into credit problems. Someone with a higher score who misses a payment could take a bigger hit than someone with a lower score, because there’s further to fall when they stumble.
2. Shorten the overall mortgage amortization – You can maximize your savings by opting for a new mortgage with a shorter amortization. Shift to a 15 or 20 year amortization from a 25 year and you will save thousands over your previous debt structure while likely paying out the same amount of payment per month.
3. Build a good relationship with your mortgage professional – With new regulations, banks remain cautious about mortgage lending, but some show more flexibility to their better customers. This is why having a good relationship with your mortgage professional is an asset. They can fight to get the best deal for you for the long run.
Ready to Refinance?
Contact Michael & his team now and discuss the options available to you. They can check to see if you would have a penalty to close your old mortgage early, how much it would be, and whether a refinance makes sense now or not based on running the numbers. Regardless of the outcome, they can build a plan to help you with your budget and get you back on track for 2014!
the Michael Anthony Lloyd Mortgage team Ph. 604-341-8775 Email email@example.com
CMHC quietly made changes to one of their programs that will likely affect all fixed rates going forward. With lenders having to find new avenues of funding their mortgages that will be more expensive, borrowers can expect those costs (approx. .20% -.65%) to be passed on directly to the end consumer, the borrower of a fixed rate mortgage. While economically we don’t have anything pushing fixed rates higher presently, we can thank our own Government for making increases happen regardless.
It’s the perfect time for those in variable rates to ensure we have a fixed rate (the 10 year at 3.99% presently is probably your best bet!) held in your name so we can watch over the next 4 months what happens and make a decision then.
For more detail on the changes see the article from Canadian Mortgage Trends:
Call our office at 604.536.8208 or toll free 1.888.536.8208
Michael Anthony Lloyd
No Don Cherry on this one!
The US Fed announced yesterday they will be slowing their buying of bonds and other monetary easing as they see the US economy starting to get into better shape…this caused mild panic on the stock markets, with most dropping suddenly late yesterday. It also affected the Bond market in a way that it should not normally…with Bond Yields spiking. See the below chart on the Canadian Government 5 year bond yield:
What does this mean? It signals that the Institutional Investor is nervous and unsure of where things are going…they don’t like that feeling!
Expect that this bumpy road will continue in the short term, until Investors see or feel more comfortable with the world economy…we will see more increases in the fixed rates, as well as some drops down the road. Long term, there is no real justification for higher rates being maintained as of yet.
Michael Anthony Lloyd