Friday, April 30, 2010

Change; it's inevitable...

It is true. The only constant is change! The mortgage world has endured a slew of government imposed changes in the last little while. Here is a brief update of the recent changes in the mortgage world:

1. RATE INCREASES ON FIXED RATE MORTGAGES: we’ve received three significant increases over the last month, increasing the five year fixed rate by almost 1%. This is an additional squeeze on the pocketbook for anyone wishing to enter the housing market. It’s really important to get a pre-approval completed if you are in the market for a home or a new mortgage as most lenders will lock in a rate for 120 days. You’ll be protected from any further rate increases within that time period. Of course, if the rates go down you’ll get the lower rate as well. A pre-approval only takes about 10 minutes to complete so it’s definitely worth your time to get one done. Please feel free to phone or email me to get started on your pre-approval!

2. GOVERNMENT CHANGES TO THE QUALIFYING RATE: What does this mean? If you are taking out a mortgage and are choosing a term of less than five years or a variable rate you’ll now have to qualify for the mortgage using the Bank of Canada benchmark rate (currently 6.10%). If you choose a five year, fixed term you’ll only have to qualify at the contract rate (the rate you are actually paying). This means the vast majority of people will likely choose a 5 year fixed ratemortgage. To be honest, I don’t really think this is much of a concern as most borrowers choose a five year term anyway. However, if you have your heart set on a variable rate it’s definitely tougher to qualify.

3. REFINANCING YOUR HOME: If you’d like to access some of the equity you’ve built up in your home for some other purpose (buying RRSP’s, purchasing a vacation property, consolidating debt etc) you’ll now be restricted to 90% of your home’s equity. The previous rules allowed you to refinance up to 95% of the value of your home. Again, I personally don’t think this is a big deal. It’s actually a good change and will force borrowers to be a bit more conservative with their borrowing.

4. INCREASED DOWN PAYMENTS FOR RENTAL PROPERTY: If you purchase, port or refinance a rental property you’ll now need at least 20% equity in the property compared to the previous underwriting guideline of 5%. I think this move will hopefully prevent unsophisticated borrowers from entering the revenue property market. Owning a revenue property is a big step and I’m sure borrowers will take it more seriously when they have to put at least 20% into the property.

Please feel free to contact me should you have any questions, concerns or require a pre-approval or mortgage assistance!

Tuesday, April 6, 2010

"Rising Interest Rates - Have we missed the boat?"

AMBA is hosting a FREE interactive WEBINAR to help consumers find answers to their questions.
Hear directly from industry experts
Live Q & A period

Date: Tuesday April 13th
Time: 7:00 pm - 7:45 pm
Location: From the comfort of your own home!
Variable vs Fixed Rate Mortgages - What do I need to know to make the right decision?
Rising Interest Rates - Does this squeeze me out of the market?
Recent changes to mortgage qualifying - How does this affect me?

Please click to REGISTER

What to do about the rise in rates

There's been a lot written in the media lately about upcoming hikes in fixed rates. While it's true many of the big banks have increased their posted fixed rates, if a new mortgage is on your horizon, there's no need to panic.

As of right now, there are still many lenders who are offering rates near historic lows. If you're thinking about buying or renewing in the near future, your best bet is to take advantage of a 120 day rate hold. This feature, offered by many different lenders, allows you to get prequalified at today's low interest rate. If rates go up, you're guaranteed today's rate. If they go down, you get the lower rate.

When it comes to locking in your variable rate mortgage, that question is a little trickier to answer. Many experts believe the Bank of Canada will start increasing its Prime rate in the near future by approximately 25 basis points. If you're in a financial situation where an increase in monthly payments is going to be tough for you to handle, it's probably wise to lock in now. When you lock in, it's important to remember that you're locking into the current fixed rates.

If you can withstand small increases in your mortgage rate, you might want to stand pat with your variable rate mortgage for now. Increases don't come out of the blue since they're tied to the Bank of Canada's prescheduled announcements so it's best to tackle as much principle as possible while you can afford it.

Whatever you choose to do, take note that lenders are particularly swamped right now as homeowners try to acquire a rate lock - or a mortgage before rates really start to increase. If you're buying a home, make sure you give yourself at least seven days to acquire financing.

If you would like advice on the options that make the most sense for your particular situation, please feel free to give me a call.