Friday

Bank of Montreal Stops Using Mortgage Brokers

Canada's fourth largest lender by assets,Bank of Montreal, has stopped using outside mortgage brokers and will instead expand its own network of mortgage salespeople. Bank of Montreal (BMO)has been losing market share in the home lending business after it stopped discounting mortgages to compete with rivals last year. The Toronto-based bank made the decision on brokers last month, saying it wasn't as lucrative as selling mortgages through the bank. The bank is also no longer buying third-party mortgages. Bank of Montreal may take a hit in market share from the change. BMO may launch new mortgage products to compete with mortgage brokers, who are increasing market share every year. For more information on mortgages and related products, talk to your mortgage broker. Mortgage brokers have access to a wide range of products.

Check out Abbotsford real estate financing options at Abbotsford Real Estate site or contact the Abbotsford realtor.

Mortgage Basics

There are many stresses associated with home buying – both financial and emotional. And frankly speaking, it doesn’t help that the process comes with its very own foreign language. While your mortgage broker can help de-mystify these terms, it helps to have a bit of a primer on what some of these terms mean. After all, it’s your money and your home we’re talking about; as a Mortgagor, you have a right to understand what you’re reading. (You didn’t know you were a mortgagor? Read on…)

We’ll start with “Amortization” and “Term”. Both refer to periods of time in the life of your mortgage, and you’ll want to be sure that you understand the difference.

The “amortization” of your mortgage is the length of time that would be required to reduce your mortgage debt to zero, based on regular payments at a specified interest rate. The amortization period is typically 15, 20 or even 25 years, although it can be any number of years or part-years. You could establish that you are able to make a certain payment each month of say $950 for your $130,000 mortgage at 5.5%. In this case, your amortization period will be just under 18 years. Or you could tell your broker that you’d like to be mortgage-free in just 10 years. With an amortization period of 10 years at the same interest rate, your $130,000 mortgage will cost you about $1,407 per month. That’s a tougher monthly payment, but you would save thousands of dollars in interest. (More than $35,000, in fact.) As you arrange your mortgage, then, keep in mind that your amortization period may be fairly long -- although the shorter you can make it, the less you’ll wind up paying for your home in the long term.

The “term” of your mortgage will typically be shorter. The “term” is the duration of your mortgage agreement, at your agreed interest rate. This will be a very specific length of time, although you will have several choices. A 6-month mortgage is a very short-term mortgage. A 10-year mortgage will be one of the longest terms, generally with a higher rate of interest to represent the higher degree of uncertainty in the economic outlook. After your mortgage term expires, you will need to either pay off the balance of the mortgage principal, or negotiate a new mortgage at whatever rates are available at that time.

Now, back to the term “Mortgagor”. This is one of three very similar terms: “Mortgagee”, “Mortgagor”, and “Mortgage”. A Mortgagee is the lender of the money: a bank, company, or individual. A Mortgagor is the borrower: the person or persons (or company) that is borrowing the money, and who will pay it back to the mortgagee. The Mortgage, of course, is the legal document that pledges the property as a security for the debt.

Still confused? Speak with a mortgage professional. Get the best mortgage suited to your needs and all your questions answered in plain talk.

Check out "The Condo Seller" for financing a condo in Abbotsford BC

Thursday

UK mortgage sales higher, rates may rise.

Strong retail sales and an unexpectedly big rise in British mortgage lending suggest three interest rate hikes since August have failed to curb consumer spending. Another rate hike may be coming due to this new development. The Bank of England said mortgage lending rose more than 10 billion pounds ($20.1 billion) in February versus forecasts of 9.4 billion. Mortgage approvals held steady at 119,000 when analysts had expected a fall. A survey by the Confederation of British Industry showed retail sales volumes rose at their fastest pace in more than two years this month, twice as fast as expected. The strong lending performance was echoed elsewhere, with the number of approvals, often seen as a good indicator of future demand in the property sector, holding up pretty well during the month. The number of approvals was unchanged at 119,000, just ahead of market expectations.The housing market is a key factor in BoE rate decisions. Rate setters are hoping that the three interest rate increases since last August, which have taken the key repo rate up to 5.25 pct, will rein in consumption and inflationary pressures stemming from a buoyant housing market. Financial markets are fully pricing in another quarter point increase to 5.50 percent.

Can't make that mortgage payment?

More than 2.1 million Americans with home loans missed at least one payment last year, according to the Mortgage Bankers Association. The rate of new foreclosures hit a record. The problem is likely to get worse, as variable rate mortgages adjust to higher rates, many borrowers are finding they can't afford their payments. And the collapse of the subprime mortgage market has made it even harder. But be aware, If you are unable to carry your mortgage, letting the bank foreclose could lead to a lifetime of hardship. Losing your home is just the beginning. A foreclosure will damage your credit for years, making it impossible or at least extremely expensive to buy another home. If the proceeds from the sale of your home don't cover your mortgage loan, your lender might sue you to recover the unpaid balance. Many borrowers who lose their homes to foreclosure haven't tried to negotiate with their lenders. Lenders are usually willing to work with borrowers to avoid foreclosure. You should call your lender before you miss your first payment. The longer you wait, the fewer options you'll have. Once your loan is declared in default, typically after you've missed three or four payments, you're past the point of no return. At that point, most lenders won't accept a partial payment of what you owe. Unless you can come up with the money to cover all your missed payments, plus any late fees, your lender will start foreclosure. Put your home up for sale. The proceeds from the sale might cover your mortgage balance and selling costs. If you have no equity or your local real estate market is depressed, ask your lender to consider a "short sale.' In a short sale, the lender agrees to accept the proceeds from the sale of your home, even if they don't cover the amount you owe.Ask your lender to accept a deed in lieu of foreclosure. If you can't sell, your lender may agree to take the deed to your home and cancel your debt.

Tuesday

Tax deductible mortgages in Canada

Is you mortgage tax deductible?

If you are like most Canadians the answer is NO. The interest you pay on your home mortgage is not tax deductible in Canada. But if you do some smart planning, the interest paid on a mortgage can become tax deductible, even when the mortgage is on your principal residence. I will be writing about how to make your mortgage tax deductible and how to pay off your mortgage faster than you think is possible. Check back in few days for these mortgage tips.

Mortgage Brokers In Abbotsford BC

Persistent Mortgages is the place to go for mortgages in Abbotsford BC. It is associated with The Mortgage Group of Vancouver. 6 brokers, Dave, Ken, Raj, Aman, Hakam, and Ray are available to help you with all your mortgage needs. The company is owned and managed by Dave McDonald. Dave specialises in commercial mortgages.

Persistent Mortgages can help you get any type of real estate financing. Check out Persistent Mortgages if you are looking for first mortgage, 2'nd mortgage, 3rd mortgage, line of credit, debt consolidation loan, commercial mortgage or business operating loan.

Monday

CMHC - Mortgage Insurance For Self Employed

There is a good news for self employed people looking to get a mortgage in Canada. Canada Mortgage And Housing Corporation (CMHC)is improving its mortgage loan approval system that can help self employed people qualify for a mortgage. New program will be available next month.

"Self-Employed Simplified" will make it easier for certain self-employed borrowers to obtain a mortgage loan insurance and as a result enable them to take advantage of of lower interest rates. Commissioned sales people will also benefit from this program. Program is designed for borrowers who have minimum 2 years of experience in the same type of work and good credit record. This product will be available for 1 or 2 unit owner occupied properties and will also be available for refinance for upto 90% of the homes value.

Talk to your mortgage broker for more info.

Visit myabbotsford.com for Abbotsford real estate information.

RED FROG MORTGAGE

What is "Red Frog" ?$?

Envision Financial (credit union) named one of its mortgage products "Red Frog". Its like a big line of credit on your home. You must have at least 10% equity in your home to qualify for this product. The interest rate on a Red Frog mortgage is same as the prime rate, which is currently 6%. If prime rate changes, your mortgage interest rate will change. The disadvantage is that you are not getting the best rate compared to a five year closed mortgage term which can be as low as 5% (Its todays' best rate), or the 5 year variable rate mortgage wich is Prime rate minus .90% (means 5.10% today). "Red Frog" allows you to consolidate all your loans into one, including your credit card debt, line of credit, and overdraft limit etc. Interest is calculated daily on the balance of the total debt. If you deposit your pay cheque on friday in your Red Frog account you will pay less interest because your outstanding total debt will be lowered for that day. Once you withdraw funds from your acount, your total debt goes up, you will be charged interest on that ammount.

How good is Red Frog?


It depends on your personal situation, your income the size of your mortgage, your other debt amount etc. If you Can use this product wisely you can surely save some money on interest payments. Another advantage is that you save interest instead of earning interest on your savings and paying interest on your mortgage. By saving interest you don't have to pay taxes on saved interest. Talk to your mortgage broker about Red Frog Mortgages or call us at Persistent Mortgages.
Raj_

Wednesday

Canadians want more flexible mortgage options

According to a recent survey conducted by Canada Mortgage and Housing Corporation (CMHC), 40 per cent of Canadian mortgage consumers are willing to make higher mortgage payments if it means they can buy a home sooner with a smaller down payment. Thirty per cent of Canadian mortgage consumers would also take longer to pay off their mortgage if it would improve their cash flow. The CMHC survey also shows that 75 per cent of Canadian mortgage consumers want to pay off their mortgage as quickly as possible, and 50 percent plan to use any extra money to pay down their mortgage principal. Today's mortgage consumers are extremely savvy shoppers who want the best product for their needs and sound advice as to what option is best for their financial situation.

Home sales increased in almost every province January, fuelling continued demand for flexible mortgage options that make buying a home easier for Canadians. Whether shopping for their first mortgage, renewing an existing mortgage or refinancing, Canadians are increasingly exploring their options.Seventy per cent of mortgage consumers are checking competitive rates, getting information from other lenders or shopping for options, and 27 per cent are turning to a mortgage broker for advice on what mortgage is best for them, according to the CMHC survey.

The sub-prime story in the states

The market began another downward march Wednesday on growing fears that the troubles in the subprime mortgage sector are turning into a full-blown financial crisis. The Dow Jones industrial average tumbled more than 100 points shortly after noon Wednesday before rebounding, as investors began to worry that rising delinquencies in the mortgage market–which have sent the stock prices of subprime lenders tumbling–could start to affect the broader economy. All three major stock indexes were knocked down about 2 percent. Subprime lenders provide mortgages to people with poor credit. Though they are a relatively small part of the U.S. economy, their difficulties raise larger concerns about the housing market, which until its slowdown in recent years was a big source of money for consumers.

Subprime loans feature higher interest rates for potential homeowners who don't have enough income to qualify for traditional fixed-rate mortgages. They are usually offered by the 50,000 independent brokers who get a fee for their services, which include attracting people who desperately want to own a home but can't afford a traditional mortgage. In some cases, applicants don't have the money to make a downpayment, so 100 percent of the home's appraised value is financed.

The prospect of bankruptcies in the U.S. mortgage industry prompted investors to buy safer assets like government securities. Lower-than-expected retail sales growth last month also rekindled talk that the Federal Reserve could cut interest rates this year. Lehman Brothers Holdings Inc., the second-biggest U.S. underwriter of mortgage-backed bonds, said risks posed by rising home-loan delinquencies are "well contained"

Canadian mortgage market is still going strong. Very high risk products have limited availability in Canada. Canadain housing market is also going strong especially in the west.

Talk to your mortgage broker about your mortgage oprtions.

Sunday

India in reverse mortgage mode

The Union Budget proposals of 2007-08 included the introduction of 'reverse mortgages' in Indian markets. The mortgage market in India is reasonably large. Its estimated size is around $33-39 billion, which is around 5% of the GDP. In other emerging countries such as China, the mortgage to GDP ratio is around 11% and in a developed country like the US, it is 52%.

So What is a 'reverse mortgage'?


In a regular mortgage, a borrower will get a loan from the lender at a particular interest rate and tenor, mortgaging his new or existing house. The borrower will then repay the loan in the form of equated monthly installments (EMIs), where a portion of the principal and the interest is repaid monthly. Usually, as time progresses, the share of principal in the EMI comes down and the share of interest rises.

In a typical 'reverse mortgage', an existing home owner can generate cash flows (loan) from his house without selling it and continue to stay in it as along as he is alive. The borrower need not bother to repay it, till his death or till he sells the house. There is no question of the credit assessment of the borrower. Reverse mortgages help 'cash poor, house rich' seniors to meet their financial obligations during their golden years, and yet continue to live in their house. This means the individuals, above the age of 62 with a limited income, can now pledge their house to a bank for a loan that they'll receive while still living in the house.

When the person passes away, banks would recover the loan and interest after selling the house and pass on the rest of the amount to an heir or anybody the individual identifies. The loan amount would be fixed after assessing the value of the property and the person's age. For now the loan period at 15 years. In India, most parents would want their children to inherit their houses even if they have to compromise on their freedom. But this may be a boon for many senior citizens who are childless.

Saturday

AIG Enters mortgage default insurance market in Canada

American International Group, Inc. (AIG), is the leading international insurance organization with operations in more than 130 countries and jurisdictions. The mortgage insurance arm of AIG will be called "AIG United Guaranty".

AIG United Guaranty will be competing with CMHC and Genworth for mortgage insurance business. Consumers will benefit from increased competition. Mortgage insurance premium rates may come down in the coming months and we will certainly see better and more flexible mortgage insurance products in the market. AIG United Guaranty will launch 13 product to start with. Check out their website for more info www.aigug.ca. Increased number of mortgage default insurance providers will provide greater home ownership access to a greater number of Canadians. Talk to your mortgage broker about mortgage insurance and options available to you or contact Raj at persistent mortgages, visit www.persistent.ca

Friday

Mortgage rates stable, house prices may rise

Canadians don't expect mortgage rates to rise, but do expect housing prices to go up, says RBC survey. Canadians voicing "buy now rather than later" preference

The possibility of mortgage rates rising in 2007 seems to be of much less concern across Canada, according to RBC's 14th Annual Homeownership Survey. In fact, over half (57 per cent) of Canadians believe mortgage rates will drop or stay the same, compared to 31 per cent last year. The RBC poll also reveals that 49 per cent of Canadians are less apprehensive about interest rate increases, compared to 44 per cent in 2006.

"When we assess the consumer sentiment being expressed in this year's study, a picture emerges of confident Canadians weighing their homebuying options in a very positive light," explained Catherine Adams, RBC's vice-president of Home Equity Financing.

At the same time, while over half of Canadians (59 per cent) believe housing prices will rise in 2007, homebuying intentions are holding steady, with three in ten Canadians (28 per cent) planning to buy a house over the next two years.

As for the value Canadians place on homeownership, the vast majority (90 per cent) think purchasing a home is a good investment, according to RBC's poll. As well, the percentage of Canadians who estimate that the market value of their homes has increased by 50 per cent or more over the past two years, has doubled since last year's survey (11 per cent compared to 6 per cent.)

"It's clear an overwhelming majority of Canadians believe purchasing a home is a good investment. In fact, the average Canadian estimates their home has increased by 22 per cent in the last 2 years," Adams added. "And the 'buy now' message is coming through loud and clear across all age groups - from 25 through to 55 plus."

Of those Canadians planning to buy a house within two years, an increasing number are looking at a shorter purchasing window. Over half (58 per cent) of all Canadians are saying buy now, don't wait for next year.

Forty-four per cent (up from 37 per cent in 2006) are looking at buying within the next 12 to 18 months.

RBC Homeownership Survey 2007 Details

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Regional differences

Focusing on very likely to buy intentions, BC, Ontario, and the Prairies are holding steady from last year, but the numbers have softened in other regions with Alberta going from 18 per cent to 12 per cent; Atlantic going from 14 per cent to 10 per cent.

Renters and owners

Of Canadians who plan to buy a home within the next 18 to 24 months, 62 per cent are renters and 48 per cent are owners. Within the shorter timeframe of the next 12 months, owners outnumber renters, 27 per cent to 18 per cent.

Housing type preferences

Detached homes continue to be the housing type of choice for most Canadians who are likely to buy a home in the next two years - 72 per cent voiced this preference. Condominiums were preferred by 10 per cent, down from 12 per cent last year. Semidetached homes were cited by 7 per cent, up from 4 per cent in 2006. Townhouses fell to last choice, named by 6 per cent of Canadians planning to buy in the next two years, down from 8 per cent last year.

More Canadians thinking "small" for next home purchase

Desiring a bigger house continues to be the most popular reason for an upcoming move, cited by 48 per cent of Canadian homeowners who are planning to purchase a home in the next two years. However, an increasing number are now saying they'll be looking for a smaller home - 33 per cent compared to 20 per cent in 2006. Eighteen per cent responded that they'll be considering a home about the same size as their present one.

Gently used tops newly built

Of Canadians planning to buy a home in the next two years, more are likely to buy a resale home (77 per cent) than a newly-built home (23 per cent). This compares to 74 per cent who favoured resale in 2006, and 26 per cent who preferred a newly-built home.

Wednesday

Mortgage Insurance

Canadian mortgage insurers are finding new ways to make home ownership affordable for more people. Mortgage insurance industry has come a long way since January 1946 when Canada Mortgage And Housing Corporation was established by the federal government of Canad to address post was housing shortage. In 1995 Genworth (GE company)entered the mortgage insurance market in Canada. Today its a multi-billion dollar marketplace with 2 major players, CMHC and Genworth. Other players may soon enter this segment of the insurance market. CMHC cover even small communities, where property values are not stable and private insurers don't like to go there. Both companies offer mostly similar products, new products are being launched on constant basis to stay competitive.

Products offered:

  • Mortgage insurance for self employed, based on the tax assessment +15%
  • New Canadian (permanent residents) can take advantage of all the regular products at the same premium rates.Interest
  • only mortgages are insured for people who have really strong credit history. At least 10% down payment is needed and first 10 years can be interest only. Mortgage must be paid within 25 years total.
  • 100% loan to value ratio mortgages can now be insured through CMHC or Genworth.
  • Genworth even has a product for people who have experienced a credit setback.
There is wide range of mortgage insurance product available now. If you didn't qualify few months ago because you couldn't get a mortgage insurance, talk to your mortgage broker again. Mortgage brokers can help you find best products for your unique situation. Call Persistent Mortgages for more info.

Tuesday

Bank of Canada holds interest rate steady

The Bank of Canada held its benchmark overnight lending rate steady at 4.25 per cent Tuesday and said the risks to its forecast remain balanced. This announcement surprised no one. Every economist polled by news agencies had predicted the central bank would make no change to its key rate, which hasn't changed since last May 24 when it was increased by 25 basis points.

The target rate for overnight loans between banks remains 4.25 percent, the highest since August 2001 and 1 percentage point less than the U.S. Federal Reserve's target. he bank has held rates steady six times in a row following seven hikes ending in May 2006. "Despite recent volatility in global financial markets, the bank continues to judge that the risks to its inflation projection are roughly balanced," the bank said in a statement accompanying the rate announcement. "The main downside risk continues to be that growth in the U.S. economy could be lower than expected."

Bank of Canada continues to say the Canadian economy is operating at, or just above, its production capacity. The next scheduled Bank of Canada rate policy announcement is set for April 24. The next monetary policy report will follow two days later. Interest rates are widely expected to remain unchanged on the next meeting as well.

Talk to your mortgage broker if you have any questions about your variable rate mortgage.

Monday

Non-Conforming mortgages

What is a non-conforming mortgage product and who is it for?

Non-conforming mortgages are mortgage product where traditional mortgage lending guidelines/rules are not followed by the lenders. Traditional or old fashioned or prime mortgages (as lenders like to call em) are for people who have excellent credit rating, good asset base, stable job or income history and lot of money (25%) for down payment. When you lack one or more items described above, you do not meet the big banks' lending guidelines and you can not qualify for a prime mortgage. Some lenders see a business opportunity in this and as a result more people are able to get a mortgage to buy a home.

There are 2 types of non-conforming mortgages:

1 - Alt-A / Near Prime

Alt-A is an alternative mortgage product for people who

  • Have good credit history
  • Have good down payment (30-35%) / low loan to value ratio
  • Don't have proof of income or job security (mostly because they are self-employed and don't show all the income to the taxman)
Big banks are lending to this type of clients now, because they are able to get insurance from Canada Mortgage And Housing Corporation or Genworth (GE). Usually the interest rate you get is as good a a prime mortgage product. More and more lenders are competing in this segment of the market.

2 - Sub-prime (or B mortgages)

Sub prime mortgage is for people who
  • Have bad credit history
  • Low asset base
  • Not enough savings for down payment/high loan to value ratio
Exceed, Home Trust, Wells Fargo, AGF plus several trust and private mortgage companies compete for this business. Client would generally pay a higher interest rate, anywhere from 6% to 15% in today's market. . Interest rates are based on risk involved in the deal. People with high debt load, new Canadians, single parents, people entering the expensive housing market usually take advantage of sub-prime mortgage products.

talk to your mortgage broker if you were not able to get a mortgage from you bank. mortgage brokers deal with all types of lenders. In most cases a mortgage broker can work out a deal for you.

check out Mortgage And Mortgage regularly for more mortgage information.

Sunday

Mortgage rates coming down? May be...

Global economy performed strongly in 2006 despite slow growth in Canada and the United States of America. Strong performance by European Chinese and Indian economies pushed the global GDP growth higher and fear of inflation remains strong. Central banks are willing to increase interest rates to control inflation.

US economy started to slow in mid 2006. Housing market began a downward trend and it continues today. US housing market is not expected to decline too much and it may recover a little bit in 2007. Economy will grow at slower rate than capacity for the first half of 2007. In last half of 2007 and and in 2008 the economy should grow at higher rate as housing and other market stabilize.

Canadian economy also slowed down in mid 2006.Tight labour market and rising wages are expected to have some influence on the growth rate of Canadian economy. Canadian economy will rebound as US economy begins to grow faster in mid 2007. Rising Canadian dollar helped keep the inflation under control. This trend may change once Canadian currency adjusts lower.

Bank of Canada is not likely to change interest rates this year. Canadian economy is growing at good rate is Bank Of Canada is focused on keeping inflation under control. Bank of Canada may reduce the interest rate by .25% this summer. Don't expect a bigger cut in interest rates. Inflation plays the key role.

If you have a variable rate mortgage, you made a really good decision. Interest rates are not expected to increase for next 18 months. Talk to your mortgage broker about advantages and disadvantages of a variable rate mortgage.

Saturday

Stated Income / Stated Assest Commercial Loans Available

Unlike most bank loans, we have a stated income/stated asset program. That means full document paperwork isn’t required – and you enjoy greater flexibility and faster turnaround times.

* No T1s, T4s or NOAs required
* No income verification
* Unrestricted equity take-out
* Loan amounts up to $1.2 million
* Secured on commercial properties like multifamily, mixed use, warehouse, office, retail, industrial, automotive, rooming houses and more
* Several affordable payment options
* 20, 25, or 30 year terms
* Fully amortized loans
* Prepayment options available

Contact Raj @ Persistent Mortgages in Abbotsford for more information.

Canadians like to pay off mortgage debt fast

CMCH survey says 75% of all respodents to the 2006 mortgage consumer survey conducted by the Canada Mortgage And Housing Corporation indicated that they aim to pay off their mortgage as soon as possible. 50% said that they would pay extra money towards mortgage whenever possible. Canadians, particularly young Canadian are cautious about their mortgage financing. Canadian mortgage survey also says that 84% mortgage consumers are satisfied with the services available in the mortgage industry. Survey also shows that Canadian like to deal with Canadian based lending institutions.
A small percentage of Canadians renew their mortgage with another lender or switch to another lender during the term of their mortgage, but majority of people remain loyal to their mortgage lender.

27% consumeres used the services of a mortgage broker, which is unchanged from previous years. However, when refinancing more people used a mortgage broker compared to past years. 71% Canadian refinanced their mortgage before the set renewal date. Most common reason for refinancing was renovation or improvements to the home.

Low interest rates, and high activity in the real estate sector are expected to keep the trends going into 2007.

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