The View May 28, 2013 Now or Later?


The past year has been a tough one for Canadians out there thinking of buying their first home or selling their current home and buying another.  With big changes to the mortgage rules, lenders coming and going, and a media seemingly hell bent on there being a housing bubble in Canada similar to the US, it has been a very tough call to make any kind of move.  Many people just haven’t…they have sat back and looked at all of this and got scared…scared enough to just sit and do nothing, waiting for some sign that the time is right…that sign isn’t coming.

People always want to ride the perfect wave when it comes to Real Estate…buy at the absolute lowest in the cycle, and buy at the absolute top.  I know someone who has been waiting for the bubble to burst since 1995, he’s still renting, his landlord loves him!  Let’s face it, for most people, the right time to buy is when they have their finances in order enough that they can afford to buy their home and still have a life.  Ideally they will have saved up 20% or more to save the CMHC fees, but this isn’t always realistic, especially in the Lower Mainland of BC.

The media loves to trot out rent vs. buy comparisons where Financial Planners will show how investing & renting instead of buying can move you farther ahead in the long run…I won’t argue that it’s possible, just that for many people the idea of paying someone else’s mortgage off while they pile up a large portfolio isn’t the same as owning their own piece of dirt.  These are the people that are sitting on the fence currently, really unsure of what to do.  I thought I would do a comparison of buying now vs. in the past.

2008; Min 5% down (Same), 5 year fixed 5.74%, 35 year am, Avg House Price $450k, Pmt $2,344

2013; Min 5% down (Same), 5 year fixed 2.89%, 25 year am, Avg House Price $500k, Pmt $2,282

So buying a home today will require an approximate average family gross income of $92,500 vs. $96,000 in 2008 to qualify, not a huge difference, but important.  That difference is magnified down the road however as the much lower rate and shorter amortization mean the 2013 mortgage will be paid off much faster than the one from 2008.  So a well negotiated purchase price today will put you farther ahead than if you had purchased 5 years ago…but…what if the argument is to wait for another year and see if the market drops more…say 10%?  This of course, is trying to predict the future, guessing the rates, and guessing there are no further mortgage changes, which are all still up for discussion.  For the sake of argument though, we will proceed.

2013; Min 5% down (Same), 5 year fixed 2.89%, 25 year am, Avg House Price $500k, Pmt $2,282

2014; Min 5% down (Same), 5 year fixed 3.75%, 25 year am, Avg House Price $450k, Pmt $2,251

Payment is $32 per month less, but more than offset by paying rent for a further year, though maybe you could save a little more down payment.

So while it can be argued that maybe the rate won’t go that high in a year, or prices could go down more, the risks are there too…the risk further tightening of the mortgage rules could occur (the more the media keeps pushing this “balloon” metaphor, the more the Finance Minister seems to want to act), prices may not drop that much (if most people have jobs, the desperate price drop is much less likely), or a million other possibilities.

I think it comes down to guessing the future is obviously impossible.  Based on the numbers above, for a slight decrease in price, the reward doesn’t seem to outweigh the risk of higher rates or tougher qualifying that we could see in the future.

If you have your down payment saved up, are wanting to make a move and feel ready, don’t let the media talk you out of it…and who knows, you may be able to get a great price now on your dream home.

Best of luck!

Michael Anthony Lloyd

Adding it all up…

Most Canadians go about their day to day lives unaware of all the little holes in their financial boats…little amounts flowing outwards, not inwards that end up becoming very costly to their long term goal of financial freedom.  Cable bills, Starbucks/Tim Hortons, cell phones, home phones, gas, insurance, it goes on and on.  One area I think many really miss is the amount paid through your banking services…here is a great article on overdrafts:

Financial Post article

In the end, it makes a lot of sense to do a sit down once a month and review where all of your funds are going…you will be in for a shock when you write it all down!

If you can reduce some of those and start diverting those funds to extra payments on your high rate debts, then your mortgage, you will be that much closer to your Mortgage Freedom Day!

Need help with it?  Call us!


Michael Anthony Lloyd

Is now the right time to consolidate your debts?

Check this out…

The POWER of Consolidation

At the end of 2012, the average Canadian had over $27,000 in consumer debt! High interest debt on credit cards, auto loans and other consumer loans can be difficult to pay off and may create a barrier to your financial goals.


 As a homeowner, one way to start managing some of your higher-interest debt is to refinance your existing mortgage with a debt consolidation mortgage. This allows you to borrow additional money on your mortgage so you can consolidate your debts into one simple payment. Now you can easily budget with ONE balance, ONE low interest rate and ONE lower monthly payment.

Refinancing your mortgage should not only be about getting a better rate – instead, it is important to recognize the power of consolidating debt as well. For example:

Current Mortgage $280,000 $1133/month 2.70% 30 year amortization
Current Outside Debt $25,000 $750/month 19.99% 25 years to pay off

This is a total payment of $1883/month.

The Michael Lloyd team can refinance this mortgage and create the following scenario:

New Mortgage $305,000 $1265/month 2.89%* 30 year amortization
Outside Debt $0 $0 0% 0 years to pay off

This is a total payment of $1265/month.

Most people would assume that the great 2.7% interest rate is something that a homeowner should leave alone and not move into a higher rate. However, in this case it makes perfect sense. This homeowner will be saving over $600/month!


This homeowner could now save the extra $600/month and have over $7200 available to place onto their mortgage as a lump sum per year making them totally debt free in 17 years!!

*Rate subject to change and used for example purpose only

The View, November 19, 2012

I recently attended the CMHC 2013 Housing Market Outlook conference where their best economists try to predict what will happen to the Real Estate market in the future (2013 & a little beyond).

Some of the most interesting take aways were:

– Housing starts to remain about the same in 2013

– The Lower Mainland is expected to see international immigration rebound from a slower year in 2011, an increase in 2012 & 2013 is predicted.

– Lower Mainland Employment is expected to grow by 2.9% in 2012 with a growth rate of 2.2% in 2013, with the majority of this growth in full time jobs.

– Mortgage rates are expected to stay low in 2013.

– Lower Mainland housing prices having dropped approx. 9% in the past 2 years, are expected to flatten out in 2013 (-0.3%).

– The Real Estate market will remain a Buyer’s market until mid 2013 when it will return to a balanced market.

What does all this mean?

If you are thinking of buying a home and don’t own one, now is the time!  Many people are to focused on what their friends are doing instead of looking at the indicators…if you were waiting for the bottom of the market, it looks like we are there right now.

If you have to sell your current home first in order to move up, it may make sense to take a hit now on your home, while buying your next home at a lower difference than will be available in the future.

If you are downsizing though, it makes more sense to wait this out.

More details here.

The View November 7, 2012

With all the changes mandated by the Government this spring/summer, most Canadian’s are still a little bewildered as to how they are affected by these changes…let’s face it, as a full time Mortgage Broker I am still learning about their impact every day.  Whether you agree with the changes or not, they are here now and life goes on, so we all have to deal with them.  The part you may not be aware of, since the media is not focused on it, is that there are a great many more changes being made in the background that could have a massive impact on you & your family…even if you are a homeowner right now!

While the Minister of Finance stood up and trumpeted his dramatic mortgage rule changes in June, he was also quietly at work making massive changes to who controls the mortgage lending in Canada and loading up the power of the once near silent OFSI (The Office of the Superintendent of Financial Institutions Canada), which oversees the Banks of Canada (Credit Unions come under Provincial jurisdiction).  When first proposing their changes to standard mortgage underwriting procedures, one of their proposals was to make all Canadians have to qualify each time their mortgage term ended!  You would have had to “reapply” each time your term was over…they let that idea die, while sliding in a number of changes that all banks and mortgage lenders in Canada (other than Credit Unions) must now start to implement ( guidelines ) by Quarter 1 of 2013.

This is all pretty dull and dreary stuff I agree, but it may very well may mean that when you go to buy a home, refinance your home, or even sell your home and buy another, you will not qualify the way you did previously.  Please read that again, it is very important!

At the very least, you will be jumping through a lot more hoops than you ever did before!  Expect to supply much more documentation, answer much more detailed questions, and have to prove things much more than you have ever been asked, all in the name of “protecting” you from yourself.

Salaried people will have to show Job letters, paystubs and T4s…and if there is any bonus or commissions  3 years of Notice of Assessments from Canada Revenue will be required to prove an average.

If you are self employed you will have to produce three years of not only your Notice of Assessments from Canada Revenue, but the accompanying T1 generals, and they will be reviewed in detail.  Dividend income is not considered income, it is considered a one time bonus, so even if you receive it on a regular basis, say for the past three years, an exception to use the average will have to be granted.  Anytime you are asking for an exception, your chances for approval lower.  If you are a rental property investor and not all of your properties show on your T1s, don’t expect an approval…the Government is using this to force people to “properly” report their income more and more.

Gifted down payments will require proof from the gifter, the gifter’s information (so they can be run through the Terrorist watchdog list), and the exact gifted amount being deposited into the borrower’s account (copy of the Bank statement)!

I write this not to scare you, but to make you aware that things are going to be more difficult in the near future.  if you are planning to do something and are concerned, now is the best time to deal with this…do not wait!  If you are self employed, now is the time to start showing more income on your T1s if you can.  Switching to dividend income now doesn’t make sense if you plan to apply for a mortgage in the next couple of years.  Even changing jobs right now could impact your borrowing ability.

If you have a Mortgage Broker, now is the time to review your personal situation with them and make a move…this is going to be a long process, best to have a plan in place now to deal with it.

Feel free to contact me for a review of your situation.

Michael Anthony Lloyd


Phone: 604-341-8775, toll free 1-888-536-8208

The View October 23, 2012

The Bank of Canada announced today they are leaving the overnight rate alone.  This means that Prime will remain at 3.00% where it has been for a long time, and will likely stay at for the next 12 months at least (Financial Post here).  With inflation remaining below the target rate of 2.00% and the world economy sputtering, there will be little interest to raise our rates other than the desire to keep Canadians from borrowing too much.

Fixed rates, which are based on the Government of Canada Bond Yields, are also remaining rater stagnant, bouncing a little up and a little down depending on the stock market…here is the 1 year chart for the Government of Canada 5 year Bond Yield:

If you add 1.75 – 2.00% (the spread the lenders wish o make) you can see where our discounted fixed rates come from.

So where does that leave you?  Of course, every person’s situation is unique, but in basic terms you should have one of the following plans;

1.  You are floating in a large discount variable (Prime – .50% or more).  My advice, Keep floating!  Ride it out as far as you can!  Just have a plan in place for when rates look to move upwards whether you plan to lock in or not and into what term.

2.  You are in a fixed rate below 4.00%.  Rate wise you are ok, but the key here is when you are coming due…while the low rate scenario is going to be around for at least the next 12 – 18 months, low rates will not stay forever, and historically when rates start to go up, they move fast, so you need to have a plan.  More on that after…

3.  You are in a fixed rate above 4.00%.  You likely need to look at paying a penalty or getting ready to break your mortgage in order to reduce your interest costs.  The amount of your mortgage and the term due date will affect this decision.  Basically it makes more sense in most of these situations to pay a penalty and get into the low rates of today which will help you pay back the penalty in savings and then get ahead, as well as let you plan for the future high rate cycle.

4.  Your mortgage is coming due in the next month to twelve months.  This is where it gets tougher.  First, do you plan to stay in the same home for the next 3, 5, 10 years?  How much extra are you paying on your mortgage and can you afford to pay more?  How much more…for those that have tighter budget now is the time to look at what will happen when rates are higher and build a plan around that, not down the road when you may not be able to deal with it.  I am a big believer in the current 10 year fixed rate available under 4.00% for a great many people, as it will get you through the next high rate cycle hopefully and at least when you next have to deal with your mortgage, your balance will be much lower, lessening the effect of higher rates.  If you are used to floating and would prefer to “take your chances” the current crop of variable rates make less sense that they used to…in the past, if you were going to take the risk of floating, you received a good discount to offset the risk.  Now, with very little discount off of Prime, variables no longer make as much sense.  I recommend a 1 or 2 year for those not wanting to lock in to the 10 year.  5 years make much less sense as they will likely come due when the high rate cycle is with us.

Remember, this is a very generic layout, and your situation is unique.  We like to first find out what your plans, needs and goals are and then build a strategy around them.  Please feel free to comment or contact me directly.

Michael Anthony Lloyd

New Guest Blog on “Tackling Our Debt”

Please take a look (click on the logo below)and let me know what you think!


Lots of great articles to save your money!

Michael Anthony Lloyd


3 Key areas to know when buying a home.

Video explaining the basic three areas you need to understand when buying a home and applying for a mortgage.


Michael Anthony Lloyd

Our New Team Video…

Just finished working on this, proud to be part of a great group of people!

Hope you like it!


Michael Anthony Lloyd


Save Money On Your Next Mortgage Transaction

Save Money On Your Next Mortgage Transaction.


My latest guest post on Canadian Budget Binder…


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