With the continual advancement of the internet, online services for providing mortgage rates and potentially in the future, signing up for the mortgage online are going to become more visible to those that prefer to do more and more of their business online.
The key to any type of online business is simplicity of service where you can basically point and click on what you want. The closer something is to a commodity, the more likely online competition and offerings will appear.
So if you have great credit and are looking for a very straightforward mortgage offering, shopping around for the best rate on line will likely become an easier process in terms of both convenience in finding what you’re looking for and the speed of completion of the mortgage process.
For anything that’s not completely straightforward, these online line rate quoting services may end up leaving you wanting more.
As I’ve written before, a mortgage decision is one of the biggest financial decisions most people will make in their life time.
So taking the time to understand where you fit into the market, the terms and conditions of different offerings, and settling on rates and terms that make sense for your cash flow and future plans is pretty important.
As I write this article and post it in online media, I truly see the value of using the internet as a tool to assist with the mortgage financing process.
But my objective is to help you locate a suitable adviser who can assist you with the process.
All the posted rate information can be very misleading and many times comes with certain conditions that may or may not make sense to your particular situation.
As a mortgage broker, my goal is to give you broader access to the market and help guide or fit you into a lender’s program that will be the most beneficial to you at any given point in time.
This is an important distinction in the process of locating and securing a mortgage as lender programs and rates are a moving target, so whatever is advertised online today can be different tomorrow and if the information is not constantly brought up to date and refreshed, can end up being misleading.
The other aspect of online rate shopping is that is basically ends up having you select one lender to apply to, based mostly on posted rates.
If you make an application to a unique lender and don’t end up taking their offering, you’re not only right back at the starting point, but you’re also going to have more credit inquiries from a “one at a time” application process.
The point here is that posted online mortgage rates can be very misleading and many times are designed to get you to apply without you being able to tell if you will even be able to qualify for the offer.
Once again, for high credit score, high income, high net worth applicants, low rate shopping on line can be very beneficial.
For everyone else, at least at this point in time, it can be a bit misleading.
If you have any questions about mortgage financing for a residential or commercial requirements, please give me a call and I will make sure all your questions get answered right away.
Private lenders are typically individuals that make their own assessment and lending decision and if they are comfortable with the case for financing, as well as the risk related to the deal, they will issue a commitment to fund the deal.
When we’re working to place funds through a bank or institutional lender, the requirements of the lender are more cut and dried and basically inflexible. Working with large transactional volumes requires a consistent application of lending criteria in order to efficiently process and approve deals. That makes a good deal of sense from a business point of view, but it can be frustrating for a borrower if they don’t quite fit into the lender’s box.
This where private mortgage lenders can provide tremendous value in the market place due to the fact that they control the ability to customize their approach to any given deal and potentially fund good deals that are not quite bankable or fall between the institutional lender cracks so to speak.
A major con of private lending that most borrowers don’t understand is that private lenders want to assess and fund deals quickly as they have funds available to put out in the market. Idle money doesn’t earn them a return, so they are interested in finding suitable deals and funding them.
Where the con comes in is that most borrowers don’t realize or appreciate that once they receive an offer to finance from a particular private lender, they need to act quickly on it or it may not remain available to them.
Unlike a bank that really has no limit to available funds, a private works with a finite money pool and if someone is waiting too long to accept an offer for financing, the private lender may very well place the funds into another deal.
Many times borrowers will shop the market and gather different quotations, circling back to different quotes over a period of time. While this approach may work with a bank or institutional lender, its certainly not guaranteed to work with a private money lender.
The key here is to start the financing process with a private lender knowing that if he or she give you 5 business days to accept an offer and you don’t accept it, there is a very good chance that it may not be available to you weeks or months later.
And while that may not seem like a particularly big deal, many times there is a sense of urgency around private mortgage financing requests and if you take too long and miss out on an offer, there is no guarantee you will find a suitable replacement in the time you have to work with.
The more diverse the lending portfolio and the higher the quality of the commercial mortgage borrower, the more apt a commercial mortgage lender is going to be to extend more credit.
Right now, there is a trend in Canada whereby more U.S. retail is entering the country to take advantage of the higher dollar and the high per capital spending that exists in Canada which is starting to rival what these retailers are experiencing in the U.S.
Here’s a recent article that provides some further insight from a recently completed report by Colliers Canada …http://www.canequity.com/blog/2011-05-influx-of-american-retailers-leading-to-more-commercial-mortgages/
If the trend mentioned in the report continues and more and more high profile, financially strong retail companies enter the Canadian market and require commercial loans, this will not only increase the commercial lending for the related type of commercial property, but it will likely also help lenders broaden out their portfolios and achieve a larger, stronger portfolio in the process.
This is potentially good news for anyone looking to acquire, renew, or expand their commercial mortgage financing in the future.
Commercial lending as a whole has remained tight since 2007 and has been slow to loosen up as lender remain cautious as to further losses they may have to endure from their existing portfolio.
But nothing loosens up the purse strings more than solid economic growth numbers month after month and credit worthy borrowers looking to acquire capital on properties in major metropolitan areas.
As a commercial lending portfolio grows through lower risk loans, it has the capacity to either cover off existing credit risk in the portfolio or branch out into more commercial markets and take on slightly higher risk opportunities.
It remains to be seen if the U.S. retail expansion in Canada will create a positive commercial property financing domino effect, but it is a strong indication of the market continuing to come around and get back to lending money on a more regular and predictable basis.
From a supply side, the commercial mortgage market has also become stronger from more private lenders entering the market and being interested in commercial properties.
At least in the near term (as nothing is very predictable these days), the commercial mortgage market in Canada appears to be strengthening for deals large and small.
If you require commercial mortgage financing for a property you own or are looking to acquire, I recommend that you give me a call so we can go through your requirements together and discuss different financing options potentially available to your in the market.
Here’s the rest of the article as well … http://www.canequity.com/blog/2011-05-majority-of-canadians-confident-in-vacation-homes-as-long-term-investments/
The survey focused on individual that had either recently purchased a vacation property or planned to purchase on in the next 24 months.
Especially in the upper end cottage communities, the real estate market can very closely reflect what you would typically see in urban areas in terms of growth rate and resale-ability.
As more individuals get prepared to take this step towards cottage type investments, the key element to making their property profitable over time is going to be the structure and rates provided by their cottage mortgage facility.
While cottage mortgages are not that difficult to secure, there can be considerable differences in rates and terms from one type of cottage to another and there can also be differences from one area to another to reflect a market that is stronger and maintains higher resale activity and interest.
And when you already own a primary residence, you can still qualify for a cottage or vacation home mortgage at very slow interest rates and low leverage, but you’re going to have to make sure you can meet the lender’s lending criteria in order to do so.
Outside of just buying a good property mortgage financing is going to be the next important element in terms of the amount of money you need to put down to acquire the property, the interest rate you’re going to have to pay over time, and the monthly debt serving that is going to impact your case flow.
In order to properly navigate through all the different twists and turns that can come into play when trying to place a cottage mortgage, your best bet would be to work with an experienced mortgage broker who can help you plan ahead of purchase the best way to approach mortgage financing so that when you locate a property you’re interested in, you’ll already know if its going to fit into your financing requirements.
With all the recent changes in mortgage regulations that have made mortgage qualifying more difficult, especially for first time home buyers, housing sales have been on the down tick.
So you would think that there would be a lot of listings than buyers on the market, right?
Recently here in Ontario, I’ve noticed that good properties are still hard to land. Clients are putting in offers on listing and finding themselves in the middle of a bidding war with other potential buyers.
There seems to be a scarcity of good properties on the market at a time when you would think the opposite would be true.
Because of the changes is mortgage qualifications, mortgage applicants are moving down market into the newly renewed Canadian sub prime space for uninsured mortgages.
This part of the market was almost wiped out a few years ago, but now makes up to around 20% of the whole mortgage pie.
Private lenders are also seeing an upswing in business due to the recent changes in regulations.
The rental market is also in a state of change now that mortgages on rental properties are basically capped at 80%, requiring a not more equity to be in the rental game.
And then there is the totally unclear view as to where interest rates are heading.
Being that we are so closely tied to the U.S. market, and there being no sign of an interest rate happening any time soon south of the border, its hard to imagine much of an interest rate increase here, but then again anything is possible.
With all the focus on the global financials in the news, there are several reports now saying that the average consumer is moving to reduce their debt to help guard against whatever is going to happen next with interest rates and financial programs.
As we continue to move into the summer period and peak real estate season, it’s going to be interesting to see what trends or patterns may emerge.
Right now its more of a head scratch as to why the markets are behaving as they are.
According to finance minister Jim Flaherty, there are no further mortgage rule changes being proposed and that the three sets of changes made over the last couple of years have the market going in the right direction.
For more specifics on what the minister had to say, here is a link to a financial post article on the subject… http://business.financialpost.com/2011/05/10/no-new-mortgage-rule-changes-flaherty/
What this means for home owners is that its time to settle into the new way of things with respect to managing their mortgage debt now and in the future.
The recent rule changes have made it more difficult to qualify for a mortgage, requiring that individuals with lower equity down payments be able to cover off a rise in interest rates with their available income level.
Reductions in the maximum amortization period, amount of debt that can be refinanced as a percentage of property value, maximum lending for rental properties, and the removal of mortgage insurance on home equity lines of credit have had a significant impact on the residential mortgage landscape.
But like with any change, there is going to be an adjustment period during which time home owners and prospective home owners are going to have to learn how to meet the new requirements in order to achieve their financial goals in both the short and long term.
The whole point of making the changes was to avoid the housing market becoming too overheated by cheaper debt that is not likely to stay at the current levels for too much longer, or at least that is what all the signs and pundits seem to be pointing to.
And to this point in time at least, housing prices have held or increased in most Canadian locales while the residential housing market to the south continues to be in near total disarray.
So regardless of whether you’re a new home owner, a first time home buyer, or a long time mortgage holder, its likely time to brush up on the new world of mortgage financing so that you can be in the best position to make good decisions on a timely basis going forward.
Because most mortgage holders have not had any type of mortgage event or mortgage decision required of them in the last couple of years, it does make sense to acclimate yourself to the mortgage regulations as they exist today as they appear to here to stay for the near future.
If you would like to better understand any of the recent changes and how they may impact your current mortgage or future financial planning, I suggest that you give me a call and set up a time where we have a discussion and get all your questions answered.
These are items such as legal fees, property taxes, land transfer taxes, insurance, etc. that are not part of the property purchase, but must be paid before the purchase transaction can be complete.
And in some cases, the amount can be fairly substantial.
I had a call the other day from a couple that were 4 days away from closing, had all their financing arranged, but did not have $12,000 to pay the closing costs.
In many cases, when the closing costs are overlooked, most people are able to scramble around to come up with the money and complete the transaction. But even in these situations, they may end up using all their available short term credit which can lead to ongoing cash flow and cash management problems in the future as well as increased cost as now more debt has to be serviced.
In other cases, the inability to close the deal can be quite costly as well in the form of you losing your deposit which can kill the whole plan of home ownership altogether.
One of the reasons that the closing cost problem happens fairly regularly is that none of the professionals involved in the transaction take the time to point it out, even though they all know that there will be closing costs that need to be paid. This can include the real estate agent, lender, mortgage broker, and lawyer.
The other problem with not estimating for these costs ahead of time is that too much of your available money may get committed to your down payment and potentially your deposit, which can influence your mortgage approval. If closing costs were properly allowed for from the outset, then funds could be put aside to cover them off and the remaining cash or equity pledged towards the purchase.
This is why its advisable, especially for first time home buyers, to work with an experienced mortgage broker that is going to walk you through the whole home mortgage financing process and outline all the steps involved, including budgeting and funding closing costs.
Then when your mortgage application gets approved, the path to closing the deal will not be derailed by something that should have been considered earlier on in the process.
As a property owner or builder seeking debt financing for their construction project, one should always keep in mind that there really is no such thing as a standardized construction loan and that construction financing can be arranged in a number of different ways.
Many times someone will call me up with a specific request for construction financing along with a predefined way to put the money in place, and after some discussion it becomes apparent that there are other approaches to consider in addition to their current thinking.
Basically most construction loans per say are for a specific amount of financing, secured by a mortgage registered against the property.
And while we can say this is the typical form of construction financing, there are lots of variations that can come into play.
For instance, if a builder or property owner has another property, it may be far cheaper and simpler to get a home equity loan against the available equity than getting a traditional construction loan in place.
Or, if the amount of funds required is small, a personal term loan or additional line of credit may provide enough capital at much cheaper rates and with more flexibility when it comes to utilizing the funds.
The same can be said in choosing between a bank or institutional construction loan and one provided by a private mortgage lender.
The listed cost of financing will always be cheaper through a bank, but in the end it may not be the best fit for the project and may not end up being the cheapest either once all the dust is settled.
For individuals trying to figure out how to finance a construction project they are planning or are in the middle of, it can be easy to self assess incorrectly the best approach to take to meet the requirements of the project for the lowest cost.
Because of the potential different approaches that may be taken, it makes a great deal of sense to be working with a construction mortgage broker who can review everything you have to work with as well as your construction project requirements, and then propose financing options that provide the most benefit and value to you.
Utilizing this type of expertise, especially if arranging your construction loan is an infrequent or one time exercise, can end up being a considerable time and money saver in the long run.
If you would like to discuss construction financing approaches for your next project or one you’re currently working on, please give me a call and we’ll go through everything together.
I was reading an article this week about a survey recently completed by Scotiabank that indicated Canadians, on average, want to repay their mortgages faster.
Here’s a link to the article http://www.newswire.ca/en/releases/archive/May2011/10/c2848.html
Typically, when a major brand commissions this type of survey they are either looking for support for a marketing angle they want to push, or they are actually trying to figure out what the public wants.
In any event, providing more mortgage options to consumers is more likely a good thing so good for Scotiabank for trying to fill (or create) a need that provides a real benefit to mortgage holders.
This is also very interesting stuff in that historically it would be basically taboo for a mortgage lender to even suggest such things due to the long term nature of the revenue stream they can generate from a long term mortgage, especially one with an maximum amortization period.
But with the expansion of services in the major banks, this could be a good strategy to try and move mortgage savings into long term investments which is still good for the borrower and good for the bank.
I’m not quite sure all mortgage lenders are going to be as quick to be teaching their customers how to get rid of their mortgages sooner, but I do believe that this is an area of the market that could use more education and more options from mortgage lenders.
This is not to say I completely agree with Scotiabank’s survey results, as all surveys these days are more prone to larger errors due to the fact that we are getting surveyed to death by telephone operators conducting these surveys.
I digress as that’s a whole nother ball of wax when it comes to having a healthy dose of skepticism any time big brands start firing around numbers.
At the same time, there will always be a percentage of the market that would respond to this type of marketing and mortgage program enhancement and as a result Scotiabank and others can use it to gain the wallet of consumers in the highly competitive “A” mortgage market.
In the end, this should all be good news to consumers.
A competitive market with more choice is one of the great things about being a mortgage borrower in Canada.
And while much is written about bad credit mortgages and credit repair to help those with poor credit secure a bank or institutional mortgage, there many be just as many or more people that qualify for an institutional mortgage, but could land an even better rate if their credit was improved.
If you surf around the internet, there are loads of credit repair courses and services available out there that make all kinds of promises to you as to what their product or service can do to increase your credit score. And while I’m sure there is some helpful advise found in these offerings, the process of credit management can be distilled down to a hand up of things that anyone can do with taking a course or hiring some sort of credit repair specialist.
The first step in improving your credit is knowing what you have to improve upon.
So by accessing your own credit score and credit profile through equifax.ca or transunion.ca, for around $24, you gain a starting point or base line to work from.
Sometimes credit scores can be negatively impacted by reporting errors. The credit reporting system is far from perfect and if there are any errors in the information displayed, getting it corrected could potentially give you a score boost plus get rid of negative that lenders would otherwise be exposed to when processing your application.
Second, make sure you are avoiding the three credit score killers:
These three actions are the 80/20 of most credit score problems.
By avoiding them, you’re eliminating actions that can reduce your credit and over time, the absence or improvement of your management of each can increase your credit score.
Third, make sure that you have at least two sources of monthly reported credit that you are using and paying off each month. Credit reports predominantly show unsecured credit such as credit cards and lines of credit.
Even if you hate the thought a credit cards or have had problems managing them in the past, its almost essential to have at least two sources of active credit to maintain or build your credit score.
And this can be as simple as only using a credit card to purchase your gas every month and then paying it off at the end of the month.
If you work with all cash, then you are invisible from a credit reporting point of view which will impact your ability to qualify for credit.
If you’re credit is damaged to the point where you can’t qualify for a credit card, then the next best option is a prepaid credit card or a term loan secured by some sort of fixed investment vehicle like a GIC.
What is important with prepaid cards or secured term loans is that the lender is reporting the activity to the credit reporting agencies. If they aren’t then these types of actions aren’t going to yield any benefit to your credit.
Fourth, check your credit at least once a year. You have to purchase your credit score from the credit reporting agencies, but you have the write to request a free credit report from them once a year. This will not provide the score, but it will provide you with a summary of your credit activity and if there is nothing negative showing since the last report, chances are your credit score is the same or higher if you have been practicing all the other steps.
That’s about it.
If you are an adult in Canada, then you will have a credit score.
If you aren’t using credit cards, your score may very well be zero.
The path to better mortgage interest rates travels through better credit, so it is important to pay attention to how you’re managing your credit activities and how they are are being reported.
The election is in the rear view mirror.
We have a conservative majority, so now what?
There is no question that a conservative majority spells greater economic and financial stability to the rest of the world, regardless of how you may have chosen to vote.
Right now the Canadian economy is on a growth path, and any change to the current approach to governance would have been an unknown that could have worked against the financial markets.
Its certainly not that change can’t be good, but change is also an unknown variable with respect to whether or not things improve from change or get worse.
So the short answer is that the results of the election are more positive than negative to the mortgage rates at this time.
That being said, there are certainly a lot of other factors to consider that impact the financial market and staying the course also leaves us with an economy that is starting to overheat a little bit as we narrow the production capacity gap and create inflation in the process.
Everything still points to the Bank of Canada raising their current 1% rate starting sometime in the next two months and then potentially continuing to increase it during the rest of the year to try and keep inflation in check.
The bond rate is trending down at the present time, which could actually create a short term reduction in mortgage rates, but it may not as well, especially if lenders view any reduction to be short lived.
So its hard to say exactly what rates are going to do for the rest of 2011, but on balance they are more likely to go up than down.
At the same time, with respect to mortgage rates in general, we are in about as good a shape we could expect to be in at this time of the year, all things considered.
Different election results could have easily lead to greater uncertainty going forward in the financial markets.
But in the end, the election results are returning us back into more of a “business as usual” mode which hopefully will bode well for mortgage rates going forward.
If you would like to discuss mortgage rates or have any questions on what types of options are available to you in the market, I recommend that you give me a call so we can book some time to get all your questions answered.
The 5 year posted rate impacted all debt servicing calculations for variable interest rate terms as well all fixed terms under 5 years.
The end result of using the 5 year posted rate was that the debt servicing was higher than what would be in affect at the time the mortgage was closed, making mortgage qualification more difficult for some individuals.
At the present time, CIBC/Firstline, Scotia Bank, and RBC have softened their criteria and are each using some combination of their three year posted rate and the contract rate to qualify short term conventional mortgages.
For more information, you can go to an article from this link http://bit.ly/jkpU5x
Because the conventional mortgage market is so competitive, it stands to reason that the rest of the majors will likely be following suit some time in the near future.
In the mean time, the different financing criteria now in place in the market can impact your borrowing application and should be taken into consideration if you are going to be tight on the debt servicing calculation.
At the same time, this change in practice is only going to be relevant to borrowers that have at least 20% equity in their homes as any mortgage amount above 80% loan to value requires mortgage insurance, which has different repayment assessment criteria.
If you would like to know more about how to take advantage the lower qualifying rates or learn more about it, please give me a call at your earliest convenience and we can set up a time to discuss it further.