Wednesday, June 24, 2015
ROB CARRICK The Globe and Mail Thursday, Jun. 18, 2015
The call display on your phone says it’s your bank calling.
If you have a mortgage coming due in the next six months, pick up. Banks can be intrusive with their client calls and telemarketing, but talking to them about an early renewal of your mortgage can save you a lot of money.
Long-time homeowners will tell you that over the life of a mortgage, you’ll almost certainly have to renew at higher rates at some point. But for the past six years, homeowners have been in the fortunate position of being able to renew at similar or lower rates. This won’t continue indefinitely, and that’s why renewals occurring through the remainder of 2015 are crucial.
Renew early with your current lender, or find a better deal elsewhere. “This is your opportunity to be a free agent, just like in sports,” said veteran mortgage broker Vince Gaetano of MonsterMortgage.ca. “This could be your big payday, so shop around.”
Early renewals can be one of the most painless of mortgage transactions. You get out of your current mortgage with no cost or penalty and move directly into a new mortgage with the same lender. “They make you feel like a million bucks when you leave,” Mr. Gaetano joked.
Canada Mortgage and Housing Corp.’s 2015 mortgage consumer survey shows that 60 per cent of people renewing a mortgage arranged the renewal in advance of the maturity date. Most did it within three months of renewal, but a fair number did the deal as much as six months ahead of the scheduled date.
Banks used to take their sweet time in sending mortgage renewal notices to clients on the principle that a short time frame reduces the time to shop around for the better deals that are often out there. But Mr. Gaetano said banks today are reaching out to clients six or more months in advance of a renewal. The point is to lock up clients for another five years and prevent them from shopping around and defecting.
“The tactic the banks are using is to say, ‘Listen, you’re paying 3.49 per cent right now on your five-year term. I can early renew you into 2.69, save you interest over the next six months and lock you in now,’” Mr. Gaetano said.
Lowering your mortgage rate immediately is one reason to jump on an early renewal opportunity. Another is to get ahead of any rate increases to come. U.S. rates are expected to rise this fall, and that could put a bit of upward pressure on mortgage rates here. It may happen, it may not. But if you’ve renewed your mortgage early, you’re covered.
Mr. Gaetano said that if you’re planning to live in your house for another five years or more and don’t see a need to refinance or break your mortgage, then an early renewal through your bank is fine. But if you foresee the possibility of breaking or refinancing your mortgage, then a renewal offers a chance to look elsewhere for better terms.
He’s referring here to the nasty penalties the banks charge customers who break a mortgage before it comes up for renewal. Read more about those penalties online. Alternative lenders have less aggressive penalties while offering rates that are at least as good as the banks.
You can’t do an early renewal if you plan to change lenders. But you can get a new lender to hold a rate for you for 120 or more days in advance of your renewal date. “This gives you an insurance policy in case rates rise,” Mr. Gaetano said.
In CMHC’s mortgage survey, 55 per cent of people said they renewed early to avoid rate increases. Another 19 per cent said the reason was that their mortgage professional convinced them it was the right decision. It’s worth a reminder here that your bank benefits as much as you do with an early renewal. You get peace of mind; they get you cinched down for another five-year term.
The most striking finding in the CMHC survey was that not even half of renewers negotiated different terms than those presented in the renewal documents their bank sent. What a waste. Mortgage renewal statements mean it’s time to call or visit your bank to discuss rates and terms. If your conversation doesn’t go well, you have options.
Focus on Mortgage Renewals
Canada Mortgage and Housing Corp.’s 2015 mortgage consumer survey offers these insights on mortgage renewals:
– 60 per cent renewed before their mortgage maturity date;
– 61 per cent said they were “totally satisfied” with the decision to renew early;
– almost 50 per cent negotiated different terms than those presented in the renewal notice from their lender;
– 49 per cent of those renewing set their payment higher than the required minimum; and
– 32 per cent made a lump-sum payment, increased their regular payment or did both since their previous renewal.
Monday, June 22, 2015
Trying to pay off your housing debt as soon as possible? See if any of these techniques might work for you:
1. Do you get paid bi-weekly? If so, consider paying your mortgage on the same schedule. By paying half your monthly mortgage expense every two weeks instead of the full amount once per month, you'll actually sneak in an extra mortgage payment by the end of the year, without even feeling it, helping to pay down your debt quicker!
2. Can you economize in one area of your budget in order to pay just a little more toward your mortgage on a regular basis? Increasing your payments by any amount will help you shorten your amortization, meaning that you'll build equity faster and potentially take years off your mortgage. Or how about an extra, one-time payment?
If you have recently received a tax refund, inheritance, bonus from work or other unexpected windfall, consider putting the lump sum toward your mortgage before the newfound money disappears into your everyday expenses. Even a few hundred dollars contributed now can add up to thousands saved later.
3. Has your household income increased? Pay that raise forward by increasing your mortgage payments by the extra amount!
Let's talk, well before your mortgage renews, about any potential mortgage options that could save you even more money. Please call today!
Monday, June 8, 2015
Just because you have the lowest rate in the market, it doesn't mean you have the best product for your situation. Most of the bottom bargain rates have stipulations in them like, very low pre payment options, you can not refinance your mortgage at all, or you can not break it unless you sell your home. Why put yourself in such a product that controls you vs a very competitive rate that gives you all the flexibility and options that make you in control? With today's rates, even a .15bps difference is only $8 per month per $100,000 of a mortgage. So is it really worth it to have the mortgage control your move? I always look out for the best interest of my clients with best options and escape routes if needed vs just not the best interest rate as others may do to win a deal over for $8 per month per $100,000 mortgage.
Stripped to essentials for marketing purposes, they can come with catches — like penalties for early repayment that might wipe out savings you banked on.
Alexandra Posadzki The Canadian Press, Published on Mon May 11 2015
Online comparison shopping is changing everything from how we buy a new television set to how we select a mortgage, and it’s causing some mortgage lenders to get creative in order to compete.
“Lenders are stripping away features of mortgages to get their rates lower,” says Steve Pipkey, co-founder of Spin Mortgage.
Consumers have always been keen on scoring a low mortgage rate, but the ease with which they can comparison shop via their computers, smartphones and tablets has created an even greater fixation on the headline number, above all else.
“The majority of our phone calls are about rates these days, whereas before it might have been more about, ‘How can I get my money out fast?’ or ‘What’s the quickest way to refinance my home?’” says Bob Aggarwal, president of Canadalend.com.
Brokers say the push for low rates is not a bad thing, but it has led to some confusion. While mortgage contracts used to be fairly standardized, many of them now contain various conditions and clauses, and in some cases it’s hard for consumers to decipher the difference between various products.
“If you’re online trying to figure out what the rates are and why, good luck to you,” says Pipkey. “Some banks and brokers are better at disclosing the fine print than others.”
In some instances, in exchange for a lower rate, lenders are adding steeper penalties for paying off a mortgage early. By chasing those five extra basis points, buyers put themselves at risk of having to pay thousands more in penalties later on down the road, says Pipkey.
Prepayment privileges also allow borrowers to pay more than their regular mortgage payments without penalty in order to get out of debt faster. But some lenders may reduce how much money borrowers can repay in exchange for a rate reduction.
Pipkey says it’s not surprising that lenders are lowering their rates given how competitive the mortgage market has become.
“Mortgage originations are down and lenders are fighting for market share in the face of compressing margins,” he said.
Bill Whyte, senior vice-president and chief of member services at Meridian Credit Union, says it’s hard to attract clients unless you offer a competitive rate that will grab the attention of borrowers.
The credit union recently offered, for a limited time, an 18-month mortgage for an eye-grabbing 1.49 per cent.
“To our knowledge, when we offered it, 1.49 was the lowest in Canadian history,” said Whyte.
“It drove a ton of traffic to our contact centre, our website and our branches.”
However, many borrowers who phoned to discuss the offer ended up going for a five-year mortgage at a slightly higher rate instead, he said.
“In a lot of cases the five-year rate fit them better, and some of that initial interest in 18-month was diverted to five-year,” he said, adding that many Canadian borrowers are looking to lock in at today’s rock-bottom interest rates before they climb higher.
Monday, June 1, 2015
CBC – Tue, 26 May, 2015
They look like the family that has it all. Louise Edgerton, her partner, John Camus, and her 10-year-old daughter, Fianna, joke around while making brownies. They move around with ease in the gleaming white kitchen of the new dream home they designed themselves.
But for Edgerton, one financial setback could change everything. "I am discouraged, because I don't see the light at the end of the tunnel. It's a little bit of a house of cards that could fall down at any time," she says.
The family is house poor, or as Edgerton puts it, "house rich and cash poor." They live in Lachute, Que., about an hour outside of Montreal, far from the housing hot zones of Toronto and Vancouver.
Edgerton estimates she and Camus spend 43 per cent of their combined income paying down their $418,000 mortgage and covering other fixed housing expenses. Once they pay the rest of the bills and buy groceries, "there is nothing left," she explains. She describes their existence as living "hand to mouth."
'Nobody talks about it'
Edgerton says she knows they're not alone. "I don't feel we are the only couple who are in debt and wondering how the hell we will get out of this."
"It's the dirty little secret," she concludes. "Nobody talks about it."
With skyrocketing house prices in some regions and the lure of ultra-low interest rates, more Canadians are living closer to the edge. But, naturally, many don't want to talk about their own house of cards.
"There definitely is a lot more going on than we see," says Laurie Campbell, CEO of Credit Canada Debt Solutions.
"Add the cost of running a vehicle to the cost of having a mortgage, the cost of raising a family [and] a lot of people are struggling. It could be your next door neighbour, it could be somebody at work, it could be one of your family members and you know nothing about it."
According to Statistics Canada, Canadians' debt-to-income ratio in the fourth quarter of 2014 was at an all-time high of 163 per cent. That means for every dollar of disposable income in a typical year, Canadians carry $1.63 of debt.
Living on the edge
Campbell says that many, like Edgerton and Camus, are surviving now, but the big question is what happens if there's an unplanned setback — from a job loss to a rise in interest rates.
"It worries me immensely that so many of us have allowed ourselves to live on the edge like this and not realize what happens should something out of daily life take a different turn," she says.
Unexpected turns are exactly what drove Edgerton and Camus this close to the edge.
Last year, just a week after they signed the deal to start building their house, Camus lost his sales job at a construction company. Then, the day before they moved in, their contractor handed them a surprise $27,000 bill for extra costs. The couple were forced to tap into their line of credit to pay for it.
So far, they've managed. Edgerton still runs her own website design company. Camus recently found a new, largely commission-based sales job at a car dealership. "I feel we can handle what we are dealing with right now," he says.
The tipping point
The two also say they live frugally, cutting out the extras and halting contributions to their retirement fund and an RESP for Fianna. But Edgerton's main concern is what happens if there's another financial emergency. "Should any bad luck happen, we are going to be in trouble," she believes.
If enough people living house poor reach their own tipping point, it could affect the value of the housing market, says Campbell.
"If the housing market goes down and those individuals have to sell, we're going to see a lot of houses on the market, which will further reduce the house market in general," says the debt counsellor.
Some housing experts say there's no need to panic. Yesterday, the Canada Mortgage and Housing Corporation reported that the country's housing markets, overall, will remain stable, though they may slow down over the next two years.
Hanging on to the Canadian dream
Camus is also sanguine about his own situation. He believes he and Edgerton won't get to the point where they have to sell their home.
With his new job, he expects his financial situation will improve. "I don't share the same stress levels [as Louise], because I do think our situation will get better."
He adds, "Owning a home is a question of pride for me."
Canada has among the highest home ownership rates in the world; owning a home is one of the ultimate Canadian dreams. And it's perhaps why so many people choose to live house poor rather than sell their home. And it's probably why some people, no matter what their circumstances, won't give up their home without a fight.
"I want to say, no matter what happens, we'll just deal. That's what we've always done. But, you know, how long can we keep that up?" asks Edgerton.