As of November 1st, 2012, the Bank of Canada 5 year bench mark rate is being used to qualify mortgage applications where the interest term is variable and/or less than 5 years in length.

For both new home purchases, and debt consolidations, and mortgage refinancings, this is having and will continue to have an impact on many Canadians looking for mortgage financing.

How The B20 Rate Is Set

Before we get into the direct impact, let’s define what the B20 rate is.

Every Wednesday the Bank of Canada sets the bench market rate which is derived from an average of the posted 5 year fixed mortgage rates of the major banks.

The newly calculated B20 rate on Wednesday is then released to the public on the following Monday, and then put into use by mortgage lenders until a new rate is calculated.

At the present time, the B20 rate is approximately 5.25% even though the actual borrowing rate to secure 5 year fixed terms right now is more than 2 percentage points less.

Impact Of B20 Going Forward.

The B of C bench mark rate now needs to be utilized when calculating an applicants ability to debt service on any variable term or any fixed term under 5 years.

Because the B20 is considerably higher than the actual rates available in the market place, many consumers are not able to meet the debt servicing requirements attached to “A” mortgage offerings or the only “A” offering they can qualify for is a 5 year rate, pushing the market place more and more towards longer term fixed rate mortgages.

Coupled with the recent changes to loan to value ratios where the maximum allowable mortgage from a federally regulated lender is 80%, the B20 rate makes qualifying for a mortgage refinance to consolidate debt much more difficult to achieve.

This will impact home purchases as well as home purchasers are more likely to adjust their sights on properties they can afford under the new rules.

With mortgage refinancing, its a bit of a different story.

In a refinance mortgage for debt consolidation scenario, the debt already exists and the mortgage holder is trying to bring down the cost of overall debt and term it out over a longer period of time.  So with less refinancing options available, cash flow stress will be harder to alleviate.

For anyone looking for variable rate mortgage, the spread between the current market rates for variable and the B20 rate is about 2.5%, or almost double current variable mortgage rates which are mostly at prime minus 0.20%, or 2.80%. So to qualify for that variable rate, you have to be able to show debt servicing ability for the B20 rate which in many cases will be impossible to do.

The Long And The Short Of It

The better mortgage rates are now harder to qualify for.

On the flip side, if you can’t qualify for a specific “A” mortgage rate right now, there are several very good sub prime offerings on the market that can work in the interim.

The key right now for all mortgage holders or prospective home buyers is to really understand your financial and credit profile to see what you can qualify for, and if you can’t qualify for a mortgage with a bank or institutional lender then its going to be important to build a plan to get yourself into “Finance-able Position” to lower your rate in the near future.

The new rules are not likely going away any time soon, so there is going to be a period of adjustment.

Even if you don’t need a new mortgage today, you would still be well served to gain an understanding of the new rules and see how your current level of debt, cash flow, and credit stack up against them.

One of the best ways to do this is to work with an experienced mortgage broker who can not only help you understand the changes in the mortgage qualifying process, but also calculate the numbers for different scenarios so you have a solid plan of attack moving forward for whatever your future mortgage needs may be.

Click Here To Speak Directly To Toronto Mortgage Broker Joe Walsh

The post B20 Rate first appeared on Toronto Mortgage Broker.

Dominion Lending Centres Toronto

At the beginning of October, our mortgage business launched a new Dominion Lending Franchise here in Toronto.

Operationally, we have the same location at 1935 Leslie Street here in Toronto, and all contact information remains the same, so for any of our existing and future clients, its all business as usual with our mortgage business.

What is different is out affiliation with Dominion Lending so I thought I would first let you know about it and then give you a bit of background on our decision.

As you may or may not know, Dominion Lending is the fastest growing mortgage company in Canada and many of the initiatives they are and will pursue going forward are very congruent with our own.

Let’s face it, the mortgage industry is continually changing and to stay not only on top of all the rule changes occurring on a monthly basis, but to also be on top of the state of the art technology for delivering information, products, and services to our customer, made Dominion a clear choice for our business.

From a mortgage product point of view, Dominion now gives us access to even more lenders as well as an expanded network of mortgage specialists and originators that can provide greater assistance in certain situations.

This provides our customers with even more choice when it comes to making a mortgage decision which will greatly contribute to achieving optimal mortgage financing results, whether we’re talking about residential, commercial, or industrial real estate properties.

The information systems, reports, and multi media presentations provide a great library of information that is designed to help borrowers to better understand the different programs and products available so that an informed decision can be reached that much faster.

And lets face it, as we all rapidly move forward into the information age with websites, social media, Youtube, Facebook, and the like, we also recognize that we have to be able to provide content to out customers in a manner than you most refer. This is another area where Dominion provides value to use as they continually make substantial investments in their information and information delivery systems.

As franchise owners, we will also have access to credit card programs and other financial products that get developed and set up by Dominion. More products and services provide greater value to our customers which is one main reasons why we made the decision to become part of the Dominion Lending Team.

There is more going on than I an elaborate on today. But I will be following up in the future to comment on more specific developments as they occur.

In the mean time, I invite you to give us a call or send me an email with any questions or comments you may have.

We welcome the opportunity to discuss this new business arrangement with our customers and also value any comments or feedback you are willing to provide.

That’s about it for today other than to say we are very excited about this new relationship and all the value it can help bring to our customers.

Click Here To Speak With Toronto Mortgage Broker Joe Walsh

Dominion Lending Toronto

The post Dominion Lending first appeared on Toronto Mortgage Broker.

One of the more confusing aspects of any mortgage decision is the accurate calculation of a potential prepayment penalty now or in the future.

If you’re looking to refinance for a lower rate and/or to gain some additional funds, an exact prepayment calculation can be obtained from your mortgage provider at any time.

But if you’re in need of a new mortgage, it can be difficult to determine what the future prepayment penalty calculation will be for any given situation.

By law, mortgage lenders must clearly outline the detailed calculation related to prepayment penalties associated to any of their mortgage products.

That being said, lending sources have never made this an easy to understand process even though all the information required is technically “all there” for you to digest.

And having to crunch out the math on perhaps a number of future prepayment scenarios you may have in mind can not only be time consuming, but also easy to do incorrectly.

So with more and more complaints about the complexity of the math and the understanding of each lender’s criteria, many of the main mortgage sources in Canada now provide mortgage prepayment calculators for anyone to use free of charge.

Here’s an article that provides links to calculators from ten of the top mortgage providers in Canada

Mortgage Calculators Provide Interesting Results

The article itself goes on to explain that after inputting similar scenarios into all the different calculators, that no two penalties ended up being the same.

This would clearly speak to the need for this type of online tool and judging by the ease of use and non use of some of the calculators, the tools need to also continually be improving.

Now, whether you’re doing some online research to refinance, you can at least get an initial feel as to what the prepayment penalty could be in a mortgage you are leaving as well as how the prepayment penalty would work for a new mortgage for different scenarios in the future.

Statistics clearly show us that consumers and business owners are going online more and more for mortgage related information and for this particular type of inquiry, these tools are a step in the right direction.

That being said, they also point out that there are vast differences in prepayment penalty calculations, and while the calculators mentioned in the article provide you with some data to work with, they are clearly unofficial with respect to any exact prepayment penalty you may incur now or in the future from any of the named lenders.

so while these resources are good for some online research, they don’t replace the need to be working with an experienced mortgage broker who can work through all the calculations and comparisons with you.

If you’d like to discuss prepayment penalties for a mortgage you now have, or for a future mortgage, I suggest that you give me a call and we’ll make sure you get all your questions answered right away.

click Here to Speak With Toronto Mortgage Broker Joe Walsh

Toronto Dominion Lending Home

The post Mortgage Prepayment Calculators first appeared on Toronto Mortgage Broker.

With the most recent mortgage rule changes coming into effect during July, there remains to be seen how all the provincially regulated credit unions will adjust to the new world of lower risk mortgage financing prescribed by the federal government.

First of all, credit unions are very well established and financially prudent lending organizations, so I don’t see any type of land rush so to speak to gain market share from banks and trust companies that fall under federal banking regulations.

But in certain situations and for certain borrowers with strong profiles, credit unions may be able to provide what the banks cannot.

For instance, banks are going to be providing HELOC’s or home equity lines of credit at a maximum of 65% loan to value down from 80%. While some credit unions will adjust to stay right in step with the main line lenders, there are still those that are offering HELOC’s from 65% to 80% loan to value.

Once again, not everyone may be able to qualify for this and its unclear if the opportunity to secure a higher HELOC through a credit union will continue, but for now it certainly can be an option for some that may gain credit unions some business and borrowers a higher borrowing amount at preferred rates.

The same may also be true for self employed individuals in terms of the manner in which they need to be able to support their earnings, and for still others that are looking to secure a variable rate or a term rate less than 5 years who have to use the 5 year fixed rate to qualify where some credit unions are still using the three year rate.

There is also a strong possibility that credit unions will soon be allowed to operate outside of their current provincial boundaries which could provide program offerings to you in the future that are not currently provided by credit unions in your area, assuming you even have regional or local credit union services available to you.

In the near term, as mortgage holders scramble a bit to get their home financing to fit into the newly minted mortgage regs, there is no doubt going to be more individuals checking out what their local credit union has to offer.

And in cases where strong borrowers are caught by mortgage rules that are inflexible, there may be some very strong options here to consider.

If you’re looking for a bank alternative for a specific financing requirement, I suggest that you give me a call and we’ll go through your situation together and discuss all the relevant options that may be available to you.

Click Here To Speak With Toronto Mortgage Broker Joe Walsh For A Free Assessment Of Your Mortgage Options

The post Credit Unions A Growing Alternative first appeared on Toronto Mortgage Broker.

Last week, the Federal Government was back at it with new changes to Canadian mortgage requirements that are scheduled to come into effect by July 9, 2012.

This will mark the third major or significant change to mortgage regulations since 2008 with the last changes occurring just last year in 2011.

This time around, the focus is on reducing the amortization period from 30 years down to 25 years on government insured mortgages as well as reducing the amount that you can borrow against your home equity from 85% down to 80%.

There are estimates out in the market that in 2011, 40% of new mortgages were amortized over 30 years so this type of reduction to the available amortization period is going to likely have a significant impact on the market.

The main reasons given for these new rule changes are the increasing levels of household debt and the overheating of housing prices in certain markets, most specifically in Toronto.

Staying on the insured mortgage theme, the rules governing Canada Mortgage And Housing Corporation or CMHC, were also tightened whereby a borrowers total mortgage payments, or gross debt servicing ratio, cannot exceed 39% of total gross income. And total debt payments, or total debt servicing as a percentage of gross income, cannot be higher than 44%.

Mortgage insurance will no longer be available on mortgage requirements for homes greater than $1,000,000, which means that for higher value properties, the buyers are going to have to come up with a down payment of at least 20% to be considered for mortgage financing.

In the long run, these changes will see mortgages paid off faster and consumers saving on interest costs.

But in the short term there is going to need to be considerable movement away from non mortgage debt otherwise its going to be difficult for individuals to qualify for the lower cost forms of financing and mortgage insurance products.

And with mortgage refinancing actions effectively capped now at 80% of the property value, there are fewer lower cost mortgage options for refinancing existing debt into a home equity loan as well.

With the rule changes coming into effect in just a few weeks from now, its going to be important to clearly understand how any of these changes may impact your own mortgage situation or one that you are considering entering into.

For more information on these changes and to get expert assistance in working through different potential mortgage scenarios, I recommend that you give me a call so we can go through your situation together and get all your questions answered right away.

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Click Here To Speak With Toronto Mortgage Broker Joe Walsh

The post Mortgage Rule Tightening Continues first appeared on Toronto Mortgage Broker.

When you acquire a residential property mortgage, the actual loan from the mortgage lender is going to be open for prepayment or closed for prepayment.

And while that may sound like an either or type of scenario, there are several variations to consider.

First of a, a residential home mortgage can be fully open or partially open.

A fully open mortgage provides you to repay all or part of the mortgage at any time during the interest term without any prepayment penalty being applied.

A partially open mortgage provides the borrower with the right to pay off the loan at any time in full with a penalty of either three month’s interest, or interest differential, which ever is the greater.

Many times people assume that a fixed interest term mortgage is a closed mortgage, which may or may not be the case.

By definition, a true closed mortgage does not allow any prepayment of the mortgage during the interest term, except in cases where an arms length sale takes place.

A closed mortgage can provide other prepayment options such as increasing the periodic payment or making lump sum payments, but not full repayment during the term.

The confusion around closed mortgage options has a lot to do with how lenders describe their mortgage products with some stating that their mortgage is closed when it actually has a prepayment option, while others are truly closed mortgages in description and function.

A truly “closed” mortgage with no prepayment options is also not very common in the market place, but it still is offered by different lenders.

Some may offer it as a full stripped down options benefit to provide the lowest rate while at the other end of the spectrum, a sub prime lender may provide it as their standard offering on three and five year interest terms.

The point here is that its very important to understand the prepayment options on different mortgage offerings so that you end up with a product that meets all your requirements and does not provide an unexpected surprise in the months and years to come when you want to partially or fully prepay the principal outstanding.

The best approach for understanding the differences among an open, partially open, and closed mortgage products in the market, is to work with an experienced mortgage broker who can answer all your questions and provide proper explanation of the terms and conditions provided by a given lender or lenders.

Click Here To Speak To Toronto Mortgage Broker Joe Walsh For A Free Assessment Of Your Residential Mortgage Options

The post Residential Open Versus Closed Mortgage first appeared on Toronto Mortgage Broker.

Collateral mortgages are getting more air play as some of the main line mortgage lenders are slowly or quickly moving to them.

Unlike a standard mortgage that results in a charge being placed on the property title, a collateral mortgage is actually a promissory note with a lien registered against the property.

In the past, collateral mortgages in the mortgage financing world were mostly used with secured lines of credit, but now there is a greater interest in using them with conventional mortgage lending.

The reason for this is two fold. First, because normal regulatory limitations on loan to value do not apply, a mortgage lender can register a lien for an amount greater than the property value, at a rate higher than current market rates. This allows the lender to be able to provide additional advances as well as increases to rate during the life of the mortgage without having to pay out the existing mortgage or re-register mortgage security.

So on the one hand, the collateral mortgage provides borrowers with potentially easier access to future borrowings at lower mortgage placement costs. On the other hand, the collateral mortgage also serves as a barrier to the lender to get a second mortgage from a different lender as the collateral charge will not provide any security value to another lender, regardless of the amount of money owing on the original mortgage.

As a mortgage tool, the collateral mortgage and be a great fit for a borrower, provided they understand how it works and the benefits it does offer are things that the borrower thinks they may be able to take advantage of in the future.

That being said, a lack of full understanding of how the collateral mortgage will function can cause problems down the road, especially if the borrower is not able to qualify with their existing lender for incremental borrowing at a time when funds are required.

But even if incremental funds cannot be secured, the borrower can still take advantage of the prepayment options provided in their collateral mortgage, refinance with another mortgage lender and discharge the collateral mortgage in the process. This will incur incremental legal costs and in most cases a collateral mortgage cannot be relocated to another lender so a new mortgage will need to be underwritten and charged on title.

The best course of action to find out more about a collateral mortgage or a specific mortgage program that may or may not have a collateral mortgage charge associated with it is to work with an experienced mortgage broker who can serve as an independent adviser to you for no cost in most cases.

Click Here To Speak Directly To Toronto Mortgage Broker Joe Walsh

The post Both Sides Of A Collateral Mortgage first appeared on Toronto Mortgage Broker.

By November, 2012, all mortgage lenders governed by the department of finance are going to have to provide more clear and concise mortgage prepayment penalty information which will need to include how the calculation will be made, calculation sheets for borrowers to utilize, where to find the different inputs into a calculation, and even how to prepay the mortgage without incurring a prepayment penalty.

This move has been promised for the last two years by the department of finance and now its finally coming into practice.

While greater transparency is welcomed by all mortgage holders, some would argue that the finance department has not gone far enough and in fact should require all mortgage lenders to follow a completely standardized prepayment penalty policy and calculation.

The argument against this is that each lender has a different set of costs they are trying to protect themselves against, and forced to follow a single prepayment policy, there could end up being higher rates in the market place and a reduction in the number of different mortgage programs that exist in the market today, which effectively is a reduction of choice to the consumer.

And while a standardized prepayment policy and payment is not likely to be legislated any time soon, the implementation of more transparent prepayment language is definitely a step in the right direction and will provide consumers not only with better tools to avoid prepayment penalties, but to also make better decisions with respect to selecting a mortgage in the first place as prepayment penalty is typically one of the least focused on an understood aspects of a mortgage contract.

But even with greater disclosure, potential prepayment calculations can still be difficult to understand fully. Which is why its always good to work with an experienced mortgage broker who can help you compare and fully understand the potential prepayment penalty that you could be facing with different mortgage options you are considering.

There can at times be a trade off between rate and prepayment in order to meet your preferred mortgage repayment strategy, so its definitely a good idea to go through the exercise of fully understanding this item before signing up for any mortgage program.

If you would like to better understand your prepayment options for a mortgage you have right now, or for a mortgage you are looking to get in place, I suggest that you give me a call so we can work through the lender’s prepayment policy and calculation together and help you determine which course of action makes the most sense for your situation.

Click Here To Speak Directly To Toronto Mortgage Broker Joe Walsh

The post Mortgage Prepayment Disclosure first appeared on Toronto Mortgage Broker.

The mortgage market has started off 2012 with a bang with BMO leading the way with their 2.99% fixed rate five year residential mortgage.

Added to that the news last week that the Bank of Canada will not change the overnight lending rate which has been sitting at 1% for the last 16 consecutive months (new record), and all near term indications are that rates are going to stay where they are, or perhaps even go lower in the short term.

The advertising of the 2.99% mortgage rate has taken the market by storm with lenders, brokers, and consumers getting caught up in a major mortgage product offering a still lower rate than we’ve gotten used to over the last number of years.

But while the rate is exceptional, the overall mortgage product does come with its limitations.

First of all, this is a closed mortgage with an annual prepayment option of 10% when the industry average is 20% per year.

This mortgage product has other stripped out features that are common in most other BMO residential mortgage products.

But lower rates, mean lower risk, so its not uncommon, and even expected that the lowest rate offerings on the market are going to have mortgage feature trade offs to consider.

That being said, if you can work with the 5 year term as written, then this is an excellent rate which is going to be in place for a full 5 years, regardless of what happens in the mortgage market place during that same time period.

In keeping with the cost benefit argument, we also currently have at our disposal a 2.99% mortgage rate product for a term of 4 years where many of the aforementioned standard mortgage features are not stripped out of the product.

So for those of you who are looking at a great rate and all the bells and whistles, this is a great product to consider for a new home purchase or a mortgage refinancing scenario.

Even though the market place is blessed with a large cross section of mortgage products, each lender is trying to differentiate themselves in the market to some degree, so its important to be able to understand not only the selling features of any given mortgage product, but also how they will be applied in real time once you have a mortgage in place.

Therefore, we always strongly advise that you work with an experienced mortgage broker who can go through the mortgage programs most relevant to your requirements, and take the time to help you clearly understand the trade offs from one product to another as well as how each product may impact you projected financial planning.

If you’re interested in learning more about these lower interest rate mortgages on the market, I suggest that you give me a call so we can quickly go through your requirements and discuss mortgage programs that are the best fit for your needs.

Click Here To Speak With Toronto Mortgage Broker Joe Walsh For A Free Assessment Of Your Residential Mortgage Options

The post 2.99% Mortgage Rate first appeared on Toronto Mortgage Broker.

We are now closing in on one year since the mortgage rules have been tightened up for insured mortgages.

With regular news reports on the high levels of consumer debt in Canada, there has even been some talk about further tightening of mortgage regulations.

While its hard to imagine further changes to mortgage rules at this point, it is somewhat surprising to read news reports that make claims that Canadian consumer debt is higher than American or British consumer debt levels.

Of course we have to take all these reports with a grain of salt as virtually all are done through some sort of survey for which the related accuracy or inaccuracy can be roundly debated.

Regardless of which country’s debt load per capita is higher, the fact remains that the average Canadian is carrying a high debt load and is having trouble getting it paid down.

Reducing debt load is all about paying down the principal loan or debt amount outstanding.

Being that most people are not likely going to be able to suddenly increase the amount of money they make each and every month, the debt reduction exercise has to turn to putting more of the available dollars towards principal reduction.

This is primarily done in two ways.

The first most obvious way is to reduce discretionary spending and put those dollars against debt balances outstanding.

The second most potentially impactful way to reduce debt is through reducing the cost of capital on the debt that is outstanding.

The keys to reducing the cost of capital on debt is to access cheaper forms of capital by leveraging assets that can be pledged for security and your personal credit score.

This is where mortgage financing comes into a play in a major fashion for those that have equity in real estate.

Consumer debt is in many cases unsecured debt which not only tends to provide higher and higher interest rates over time, but also has a negative impact on your credit score when you are utilizing a high percentage of available credit.

And most of the debt or credit that impacts your credit report is unsecured and/or revolving forms of credit, not mortgage credit.

So when you are able to pay down the sources of credit through mortgage financing or mortgage refinancing, you can potentially access cheaper capital through mortgage financing and have your credit score improve through lower credit utilization of the sources of credit that are tracked by the credit bureaus. This will in turn lead to lower cost secured and unsecured consumer debt.

As I stated at the outset, a lower overall cost of capital allows more of your monthly cash to be available for debt pay down.

While this is not going to be a solution for everyone with high consumer debt, for those that have equity in real estate, there is no time like the present to see if you can devise a debt reduction strategy through greater leverage of mortgage financing.

The best way to determine what options are available to you and how to go about taking advantage of them is to work directly with a Toronto Mortgage Broker who has the experience and lender sources required to make this approach work.

Click Here To Speak Directly To Toronto Mortgage Broker Joe Walsh For A Free Assessment Of Your Mortgage Options

The post Reducing Consumer Debt In 2012 first appeared on Toronto Mortgage Broker.