According to a recently completed survey by the Canada Mortgage And Housing Corporation, 80% of Canadian home owners are doing some form of annual budgeting, and 71% have factored into their budgeting efforts the possibility the interest rates will be going up.
Here’s more information on the survey from the financial post”
The major risk area of people not prepared was in the new home owner category where budgeting and cash flow planning was not as predominant as with longer term home owners.
It would seem that all the news related to the projected future path of interest rates and tightening up of mortgage regulations has registered with Canadians that they must be prudent in managing the level of debt they are carrying, primarily mortgage debt, and the potential costs of carrying the debt.
The survey also indicated that 75% of respondents were focused on paying off their debt as soon as possible. Once again, this is good for the economy as a whole that the majority of the general population is more capable of withstanding a significant interest rate increase or a real estate market price adjustment.
It will be interesting to see how mortgage holders will continue to view fixed and variable rates in the months to come in terms of balancing cash flow management in the short term and interest rate risk in the longer term.
As a Canadian mortgage holder or future mortgage holder, there has never been a better time to select a mortgage program that best fits your budget and debt repayment preference.
And with all the information now available on line, its much easier to get a sense of where things are headed in the local and global financial markets, as well as first hand information on how different mortgage products can help you better manage your finances.
Hopefully interest rates will continue to stay down, but the reality is they are more likely to go up than stay where they are for any extended length of time.
If you’re going through a budgeting process and want to further develop your mortgage repayment strategy, I suggest that you give me a call and we’ll go through everything together and get all your questions answered.
Click Here To Speak With Toronto Mortgage Broker Joe Walsh
We now have a couple of major mortgage lenders offering Home Equity Line Of Credit Rates at prime minus a half while at the same time the unsecured lines of credit continue to be on the rise.
Don’t be too surprised to see more of the major mortgage lenders that offer HELOC’s to follow suit with the Prime -%0.5 rate in coming days and weeks ahead.
As borrowers, this is great news with personal capital getting cheaper and cheaper provided that you have good credit, cash flow, and some equity in your home.
If you’re wondering why this is happening now when there is still a lot of talk about rates going up and potentially further mortgage regulations being considered to limit mortgage credit risk, my guess is that the answer has a lot to do with competition.
Mortgage lenders, especially the major banks are investing heavily in attracting and keeping residential mortgage customers. Most of these lenders are integrated financial service shops that want to be selling mortgages, lines of credit, car loans, credit cards, investments, and insurance to their customers for decades to come.
So anything that helps them latch on, or stay latched on to their customers is preferred. Even with that being said, the prime minus Heloc rates would also indicate that mortgage lenders are not overly concerned about the housing market as a whole and believe that home equity leverage is a pretty secure bet.
And even though these market leading Home Equity Line Of Credit Rates are 2.5% today, they could easily be 5% in a couple of years if long term mortgage rates tend to start moving back into more of a historical posture.
But in the short term, Home Equity Mortgages in the form of a line of credit have now become the cheapest source of short term or readily available money you can get your hands on.
So how might you take advantage of these great rates?
Well, if you have a fixed mortgage that still has a number of years remaining on it, but has some prepayment options attached to it, you may want to consider paying some of it down with funds from a Home Equity Line Of Credit to cost average your interest rate down. If you’re planning to be paying down your mortgage faster than the amortization anyway, then this can be a way to get the most benefit out of the exercise by reducing the interest cost today and using your extra cash to pay down the HELOC when you have some available.
Nowadays mortgage companies are putting more and more flexibility into their mortgage programs to suit whatever repayment plan you may have. But if you presently have a mortgage that’s been in place for a couple of years already, the rate may be quite a bit higher and prepayment terms less flexible than what you could sign up for today.
So creating your own mixed rate mortgage may be an option through utilizing these great HELOC rates in the short term.
And if you have equity in your home and you’re utilizing an unsecured line of credit right now at an interest rate 2% above these top end Home Equity Line Of Credit Rates, then it may be worth moving from one to the other.
Obviously, this also represents a very flexible source of capital for all sorts of other uses.
Even if you don’t have a current use, it still can be advantageous to get something in place now at the current offering so that you have ready access capital in the future.
If you’d like to learn more about HELOC rates and terms, give me a call and I’ll make sure you get all your questions answered right away.
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The commercial business mortgage application process for a bank or institutional lender can be very different from a private mortgage lender.
First of all, a bank or institutional lender, by definition, is a low risk lender, providing prime plus interest rates in most cases. In order to commitment to providing a commercial mortgage, the bank or institutional lender must determine that the risk of loss is appropriate for their lending criteria.
In order to accomplish this, they take a look, in detail, at the security being offered, cash flow repayment, business model dynamics, balance sheet leverage of the borrowing entity, personal covenants in many cases for the owners of the business, credit of the business and personal owners and so on.
Step one in an institutional commercial mortgage is completion of a complete information package that can take some time to prepare as it typically will require the last three years of historical financial statements for the borrowing entity, current year interim statements along with all supporting sub ledgers and schedules, two or three years of projected financial statements including income statement, balance sheet, and cash flow all reconciled, a rent roll if the financing is on a rental property, and a business plan/business overview that accurately describes all the working parts of the business and how each may lend to profitability and business risk.
Once a complete application is submitted, an initial review will be preformed from which follow up or clarifying questions are likely to arise. This can result in requests for additional information that will need to be compiled or prepared and submitted to support the primary application.
If at this stage of the process, the lender sees the potential for providing a commercial mortgage, then a term sheet would be issued outlining the potential terms and conditions of a commercial mortgage facility.
If the applicant signs back the term sheet, then the outlined conditions would next need to met in order to get to the stage of a formal commitment for funding.
The conditions that typically will be required to be covered off at this stage include a third party appraisal from an AACI appraiser, an environmental assessment, and potentially accountant prepared year end or interim statement to bring everything up to date.
If everything checks out, then the lender will issue a commitment which will outline any remaining conditions that will need to be met and the borrower covenants.
All in all, this process is going to take at least 60 days and in many cases the time period will be even longer depending on the amount of time it takes to complete each step and get all the information requirements covered off.
In direct comparison is the commercial mortgage application process for a private mortgage lender.
While many of the same items are going to be required, a private lender is going to be more focused on the equity in the pledged security and the marketability of the real estate now and in the near future.
Cash flow repayment is going to also be important, but not to the levels required by a bank and institutional lender.
And if things like appraisals or environmental appraisals were completed in the last couple of years and readily available, these may suffice for the private lender’s purposes.
Because of the more streamlined process, a private lender commercial business mortgage application process is going to be at least 30 days from application to disbursement with some deals taking longer once again to the time required to complete conditions or outstanding information requirements.
Time, effort, and lender relevance to a deal are all key factors in the commercial property financing process.
Spending too much time and effort focused on the wrong lender can cause serious problems to the business or property owner if funding must be in place by a certain time.
On the flip side, working with too many mortgage providers can be a bad idea as well due to the amount of work that goes into assessing a deal.
The best approach for securing an optimal commercial mortgage in the time you have to work with is to enroll the services of an experienced commercial mortgage specialist to guide you through the process and get you focused in on the most suitable lenders for your requirements.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh For A Free Assessment Of Your Options
Cash back mortgage programs are fairly new to the market, but gaining popularity with a couple of different groups of borrowers.
While there are a number of different versions to a cash back mortgage, essentially the mortgage lender is providing cash back to you on closing of the mortgage, and potentially during the mortgage term, as an incentive for you to commit to a variable or fixed rate mortgage for a period of time.
For the rate shopper, this can provide a very competitive, and sometimes best available effective mortgage rate. This is accomplished when the cash back received is immediately applied to the principal balance outstanding on the mortgage, reducing the interest costs over time, and lowering the overall effective rate you’re paying.
For those looking for a mortgage refinancing where one of the applicant’s goals it to free up some additional capital out of equity via a larger mortgage, certain cash back programs can provide advantages over conventional mortgage programs. For instance, if the new mortgage rules regarding maximum loan to value for mortgage refinancing is not going to allow you to generate the amount of incremental funds you’re looking for through a refinancing action, the cash back mortgage is an interesting option to consider.
With certain cash back mortgage programs, you can refinance to the maximum loan to value allowed according to the value of your property and immediately receive a cash back payment on closing of anywhere from 1% to 3% of the new mortgage amount, providing incremental funds to be used however you wish.
You’ll also need to keep in mind that breaking a cash back mortgage before the term is up can be fairly expensive as most programs require the repayment of the cash back amounts advanced in full as well as any prepayment penalties that may apply.
The cash back mortgage program is not going to be the best fit for everyone, but for rate shoppers that are prepared to lock in for a period of time and mortgage refinancing actions that need to generate a bit more leverage, these programs can be a very good fit.
If you’d like to know more about cash back mortgage programs and how they may fit into your mortgage financing requirements, please give me a call so we can go over your situation together and work through the numbers to see if a cash back option makes sense for your mortgage needs.
When I speak of a commercial bridge loan, I’m referring to a mortgage on commercial property that is no longer than 18 to 24 months in duration.
The primary source of commercial bridge loans is private mortgage lenders.
There are two basic categories where a commercial loan for bridge financing would apply with category one being for the direct financing of land for purchase or refinancing of an existing mortgage, and category two being where a commercial mortgage is registered against a property in first or second position to pull out a certain amount of equity for some unrelated purpose.
In both cases, the amount of funding required is only for a short term, either to complete a transaction or buy time until a cheaper form of financing from a bank or institutional lender can be secured.
In many cases, a commercial bridge loan may not just be the best option available, but the only one available in the time period you have to work with.
Commercial property from bare land, partial construction, to completed real estate assets can be used for security for bridge financing, keeping in mind that the less developed the property, the lower the lending amount as a percentage of the property value will likely be.
For a private mortgage lender, the keys to bridge financing is quality and amount of equity offered as security, and the plan for repayment of the loan at the end of the commercial bridge financing period.
Private money sources can provide commercial bridge loans from as low as $100,000 to as high as $10,000,000. Sources for larger deals will be fewer as most private lenders work in a funding range below $2,000,000.
The key benefit of commercial bridge financing is the ability to get a certain amount of funding into place within a defined period of time. Many times with commercial properties, banks and institutional lenders can take considerable time assessing the deal which may take longer than the time you have to work with.
A private mortgage commercial loan will typically take much less time to get approved with funding to follow shortly there after.
While private money typically is going to cost more than a bank or institutional bridge loan, lower cost money won’t do any good if it can’t be put in place in a timely fashion which typically is a requirement of a commercial bridge financing transactions.
If you need to secure a commercial bridge loan or want to know more about your potential options for commercial property financing, I suggest that you give me a call so we can go through your requirements in detail and then discuss different approaches you can take to secure commercial bridge financing.
CIBC cash back mortgages, available through our Mortgage Centre Brokerage, have a number of interesting features for those looking to refinance an existing mortgage.
Coming in both fixed and variable offerings, these products are designed to provide competitive mortgage terms as well as giving you cash in hand to either pay down the mortgage right away or to use the funds for other purposes.
For instance, with the variable mortgage option, the mortgage rate is priced at prime minus 0.50 and will provide 2% of the mortgage balance at closing in cash back to you for mortgage amounts under $400,000 and 3% for mortgage amounts over $400,000.
In this variable rate example, if you were to apply the cash back portion from a $400,000 plus mortgage against the outstanding balance immediately after closing, the effective rate of the mortgage would drop below prime minus 1.1%, making it one of the lowest cost products on the market.
And if you are looking for a debt consolidation through mortgage refinancing, or want to pull some equity out of your house for some other reason, the cash back option may also be very attractive to you.
With a mortgage refinancing, you can now only secure a mortgage up to 85% of the value of the property, down from 90% earlier this year.
So if you’re pushing against the 85% limit and still can’t get enough funds to meet your requirements, a cash back mortgage can provide additional capital to you and still keep you within the qualifying requirements. For instance, a 3% cash back bonus at closing of a $450,000 mortgage refinancing will provide you with $13,500 cash in hand to use as you see fit. This would be the same as an 88% loan to value mortgage in terms of the funds advanced to you.
On the fixed interest rate side, the cash back program will reduce the posted fixed mortgage rate by up to 140 basis points and also provide cash back on closing of 0.25%.
There are different terms and conditions that can apply to a particular scenario, so you’ll have to work through the numbers to see how this can work for your requirements.
This is a very interesting mortgage program that provides some interesting options to customers in terms of great rates and additional cash.
If you’d like to know more about the CIBC cash back mortgage programs available through The Mortgage Centre, I suggest that you give me a call and we’ll go through your particular requirements together.
Here in Canada, companies like Citifinancial, Citi Corp, Household Finance, Accredited, and Avco Finance provided modest amounts of financing rather quickly to borrowers with few other options.
In some cases, overtime, these could have become consolidated into these companies sub prime mortgage products similar to other debt refinancing in the market.
And during the recent recession, this type of funding remained available when other forms of financing on distressed credit situation either pulled back on issuing loans or left town all together.
But the sub prime market is starting to rebuilt itself with more lenders and offerings getting back into the game to provide sub prime offers to different slices of the residential mortgage market.
The result is that for certain borrowers that currently have a Citifinancial mortgage, Citi-Corp mortgage, Household Finance mortgage, Accredited mortgage, or Avco Finance mortgage, you may now have different and perhaps better mortgage financing options available to them in the market.
Specifically if you are in a situation where your mortgage will not be renewed or is in demand for repayment from your current sub prime lender, provided you have some equity in your property, there is a good chance that options are available either from an institutional lender or a private lender.
Or if you are paying a mortgage rate of 9% or higher, there is also a good chance, depending on the equity in the property and your borrowing profile, that a better sub prime option can be available to you as well at the present time.
If you’re considering refinancing an existing mortgage, you’re going to have to consider prepayment penalties. But for certain types of sub prime mortgages where the borrowings are integrated among credit cards, term loans, and home mortgage advances, the stated mortgage balance may be considered open for prepayment and could be moved to another lender without much cost.
Once again, the above mentioned secondary market lending sources can provide a valuable service for short term financing and have filled this role very well, especially since 2007.
For some people paying these mortgages, there may now be better options available in the market as things start to return to more normal sub prime lending.
If you have a mortgage in Canada with Citifinancial, Citi-Corp, Household Finance, or Avco Finance, or Accredited, and either need to refinance or would like to better understand your options, please give me a call and we’ll go over your situation and options together.
Click Here To Speak Directly With Toronto Mortgage Broker Joe Walsh
A commercial mortgage financing strategy for acquiring a property or refinancing an existing commercial mortgage can involve both a private mortgage and a bank or institutional mortgage.
Let me explain.
If you or your business have a strong enough lending and credit profile to qualify for a bank or institutional commercial mortgage, then the only thing that might be working against you in terms of getting financing arranged and in place is time.
Bank and institutional lenders that provide commercial mortgages follow a very deliberate and methodical process to go through a request for financing, validate key sources of information, issue a commitment to fund, and fund the deal. All of this takes time which can range from 60 days on the short end to 90+ days on the long side of things.
If you’re in need of financing to close a purchase or refinance an existing mortgage, you may not have enough time to get an institutional property loan in place.
Instead of risking losing out on a good buying opportunity or incurring additional costs when a refinancing is not completed in time, another solution would be to first acquire a private mortgage against the commercial property in question.
Private lenders, on average, can make financing decisions much faster than a bank or institutional lender.
By trying to get a private mortgage in place first, you increase the probability of meeting your deadlines.
Then, once the new private mortgage is in place, you can spend as much time as is going to be required to locate and secure a bank or institutional mortgage for the long term needs of the business.
The private money serves as a bridge loan to allow you to meet the immediate needs while buying time for you to locate the best available commercial mortgage deal on the market.
Yes, a private mortgage is likely going to be a bit more expensive than a commercial mortgage from a bank. But in many cases, the difference between bank and private on commercial properties can be less than you might think.
In addition, the private mortgage is likely going to be interest only payments versus a fully amortized payment, so you will also get a cash flow advantage during the time the private money is in place.
And getting the right commercial mortgage deal when you’re not forced to take whatever you can get due to time pressure can save you a considerable amount of money over time making whatever the incremental cost of a private mortgage small by comparison.
If you’re in need of commercial mortgage financing and don’t have a lot of time, I suggest that you give me a call so we can quickly go over your requirements and review private mortgage options that may be available to you in the market.
If you’re like most people considering home renovation, there are likely a number of projects you’d like to take on, but will limit what you actually invest in doing today based on the amount of capital you have to complete the work.
And what you include in the scope of work is going to have both an aesthetic value to you and an economic value to the market place.
Sometimes the personal value and economic value are very similar and sometimes they’re not.
One way to get a better idea of how much certain types of home renovation activities or projects can add to the value of your home is to utilize a valuation tool like the one provided by the Appraisal Institute of Canada. Here’s a link … http://bit.ly/G6S5a
This handy little tool allows you to put in cost estimates for different types of home renovation works and provides an estimated range of value or return on investment you can expect to earn over time from the completed work.
Keeping in mind that this tool provides you with some pretty broad ranges of potential value, the real benefit of using it is to get a comparative assessment between different renovation projects as to which ones add more value to your home than others.
Depending on your mindset and motivation for doing certain renovation work, this may not have any bearing whatsoever on what you choose to spend your money on.
But if economic value is important, this can at least give you something to think about as you plan out the complete scope of work and the related budget.
Another thing to keep in mind is that for renovation projects where construction mortgage financing will need to be procured, an assessed value of your home post renovation may be important in terms of the amount of money you can borrower.
Or put another way, the higher the value added renovation work being undertaken, the greater the increase in value in your home, and the more potential funding that can be raised against the future value of your home.
If you’re looking for a home renovation loan, I suggest that you give me a call so I can quickly assess your needs and provide relevant options for your consideration.
Click Here To Speak With Toronto Mortgage Broker Joe Walsh
According to a recent survey by CIBC, over 60% of respondents said they thought interest rates were going to increase in the next year.
But of those surveyed, only 39% said they would choose a fixed rate at this time.
Here’s a link to the full article from the Financial Post … http://www.nationalpost.com/Prospect+higher+rates+hasn+people+flocking+lock/4880972/story.html
This underlies the ongoing debate over fixed versus variable rates that we have with clients every day.
From a “what should I do” point of view, there is really no right answer. There are good arguments for both, even in a rising rate environment.
The statistics do show that a high percentage of Canadians have been conditioned now to variable rates as staying variable has netted some considerable savings over the last number of years.
And many people have stayed variable during times of rate increases or projected rate increases, only to see interest rates settle down or even fall, further benefiting from their variable rate position.
But there is no guarantee that such good fortune will continue sticking with variable rates.
With all that’s going on in the global financial markets, its not beyond imagination that rates increase and then stabilize at a higher level which would make fixed interest rates very attractive right now.
It’s all about who’s crystal ball is more accurate over time.
And it would appear from some of the statistics out there, such as the CIBC report mentioned above, that there is a good portion of the population that’s going to stay variable until it doesn’t make any sense for them, or they can’t afford the financial risk of rates going any higher.
Added to everyone’s personal assessment of fixed versus variable is the fact that fixed rates have recently been coming down why variable rates have remained unchanged, creating an even greater rationale to go variable at the present time.
Once again, a big part of anyone’s final decision on rate structure is going to relate to their own situation, personal assessment and tolerance for risk, and long term financial plan.
To get more information on mortgage interest rates and what might make the most sense for you and your family, give us a call so we can assess your situation and get all your questions answered.
With the continuing drop in the 5 year bond yield, it appears only a matter of time that fixed term mortgage rates are going to do the same.
Fixed mortgage rates are closely linked to the bond market and with the bond yield now at a 5 month low, the correlation with fixed mortgage rates should spark some positive downward movement.
For a look at the most recent yield chart, click on this link …http://www.bloomberg.com/apps/quote?ticker=GCAN5YR:IND
This makes it a positive week overall for the mortgage market with the week starting off with no movement in the Bank of Canada’s overnight lending rate which tends to have a direct impact on variable mortgage rates.
The spread right now between the bond rate and equivalent term mortgage rates are significant enough that competition is likely going to bring rates down in order to grab or maintain market share.
All of this is potentially good news for mortgage holder and mortgage shoppers in Canada.
What type of rate change is likely to take place is hard to predict and it will also vary from region to region in the country, based on competitive forces in each area.
All the financial uncertainty in the world has made it more attractive to hold AAA Canadian Government issued bonds. Bonds have an inverse relationship with interest rates, so as the price of bonds gets bid up higher due to increased demand, the interest rate yield on the bonds drops.
The end result is that mortgage lenders have a cheaper source of money to draw on which should translate sooner than later into lower fixed term mortgage rates.
If you’d like to know more about how these potential rate changes may impact your mortgage situation or requirements, please consult with an experienced mortgage broker to help you stay on top of the expected rate moves.
Yesterday the Bank of Canada announced that its maintaining its overnight lending rate at 1%.
This is good news for variable rate mortgage holders as most variable rate mortgages move directly with any changes in the over night rate.
The last number of months have produced considerable speculation about if and when rates are going up, and while most economist believe that interest rates are going to be going up, its not likely to happen right away.
A return to a more traditional overnight rate of 2% to 3% is now being pushed back to 2013 by some pundits.
It was only a month or so ago that a rate hike at the end of May seemed like a forgone conclusion. But then again, it shows just how much can change in a short period of time and how unpredictable interest rate movements really are.
For more information about the B of C’s announcement, here is the link to their site … http://www.bankofcanada.ca/2011/05/press-releases/fad-press-release-2011-05-31/
The next scheduled interest rate decision date is not until July 19, and the current consensus from those supposedly in the know is that there isn’t likely to be any further rate increases until at least September.
But, of course any predictions with respect to interest rates are subject to change.
So in the mean time, those holding variable mortgages, or considering one can continue to enjoy the near record run we’ve had in Canada at the low end of the rate spectrum.
Hopefully the trend will continue well into the future.
Click Here To Speak With Toronto Mortgage Broker Joe Walsh
