10 minutes of your time could save you a lot of money…

Mortgage Tips Robert Ganzhorn 8 Feb

Do you review your annual mortgage statement? A quick review could save you thousands of dollars.

You’ll soon be receiving your annual mortgage statement and if you’re like most people you’ll note what your balance owing is and then put it away.

Rather than doing that pick up the phone and call me.

A quick call and we’ll be able to determine if you’re in the position to make some mortgage changes and save yourself some money.

Contact me 416-799-4049 for your free review.

 

Variable rate war…*YAWN*

Mortgage Tips Robert Ganzhorn 17 May

If you’ve been watching the news you’ll notice the big lenders are pulling out all the stops with a variable mortgage rate war to try to offset the lack of mortgages being funded this spring.

A few thoughts on this….

My brokerage has had these rates for weeks now. We can offer the big lender mortgages to you as well but those are likely more restrictive (fine print) than what we already have in our toolbox

For those of you that took a variable rate mortgage before this announcement and are stuck at a higher rate I feel badly for you. But you’re not really stuck – YOU SHOULD LOOK INTO BREAKING THAT MORTGAGE REGARDLESS OF HOW LONG YOU’VE HAD IT. Standard breakage for a variable mortgage is three months interest which may not be a huge penalty depending on the facts surrounding the mortgage. To top it all off there are lenders that offer no charge transfers and allow you to capitalize up to 1% of the mortgage balance to a maximum of $3,000 to cover those breakage fees. It’s almost found money in some situations.

Finally if you have a mortgage renewing within a 90/120 days hurry up and get a pre-approval or just break it now and execute on these offers.

Investing in a stress tested lending environment

General Robert Ganzhorn 17 May

investing sign

Has the stress test has resulted in funding declines for your investment portfolio? Whether a refinance or a purchase its definitely harder to get money in this environment.

Here are some items to consider which may make it easier to qualify under the stress test.

Property types

Consider purchasing  2 to 4 unit properties not just single family dwellings. These properties are still insurable and while a stress test still applies it’s the insurable stress test which is easier in some cases than it’s conventional counterpart. You’ll also get the benefit of better insured mortgage rates.

Multiplex properties (5+ units) are considered commercial and use a different underwriting framework – GDS/TDS ratios don’t apply and neither does the stress test. That being said they are individually underwritten and the underwriting framework is certainly no cakewalk but doesn’t include you personal income and obligations – the building is expected to carry itself.

If you’re a large market investor expand your horizons and look at smaller market properties that are less expensive. They may garner lower rents but the lower mortgage amount may make the purchase a possibility.

Income and obligations

Since you’re being qualified under the GDS/TDS framework manage the items affecting these:

  • For those of you that are business for self you may want to report higher income for the past year. Self employed income is typically taken as the average for the past two years so a higher income this year will boost the income on your mortgage application. And since self-employed tax returns aren’t due until June 15th you still have time to consider this option for this year
  • Consider reducing your rental expense claims to report more income
  • Your unsecured debt balances (credit cards and personal lines of credit primarily) are included in your applications as an obligation equal to 3% of the outstanding balance rather than the minimum payment. Consider moving those debts to fixed payment loans if it makes sense or even better pay them off if possible
  • Find ways to increase your down payment to reduce the mortgage amount. Liquidating under performing investments is an option as is partnering with another investor

Who are you borrowing from?

Use an alternative lender that allows for higher GDS/TDS ratios and/or allows for a higher percentage of rental revenue to be recognized in your application. Their rates are a little higher but for the right investment these lenders can provide a viable option.

Don’t always use a bank. There are still lenders out there with good rates that don’t stress test.

What property are you borrowing on?

A lenders that provide equity lending on principle residences still exist and typically these offerings allow for much higher ratio allowances. If your principle residence has a low LTV there are A lenders that provide good rates for these programs. Use the money borrowed to invest

Remember that each investors situation is different and needs to be assessed on a case by case basis.

TD boosts posted 5 year mortgage rate

Mortgage Tips Robert Ganzhorn 25 Apr

TD Canada Trust

Wow….TD just boosted their 5 year posted mortgage rate to 5.59% a full 40 basis point over their previous rate of 5.19%

This matters for a few reasons..

Its the average of the big banks 5 year posted rate that the Bank of Canada (BOC) qualifying Rate is derived from. If enough of the big banks do this you can expect a higher BOC qualifying rate. This would make it harder to qualify for a mortgage since that rate is used in both insured and uninsured stress tests for home buyers and investors.

It also means that if you’re in the process of a mortgage application with TD you should quickly start to look at other lenders..they just made it harder to qualify with them.

And finally remember that the calculation for breaking a fixed mortgage with TD has an add back in the penalty calculation equal to the discount you received from the posted rate effectively increasing a breakage penalty significantly.

If the big banks follow suit less affordability is a possibility. I’m wondering if this will effect selling prices.

Just in time for the spring market..odd timing hmmmmm….

Why do some lenders have posted mortgage rates but never issue them with a mortgage?

Mortgage Tips Robert Ganzhorn 18 Apr

If you’ve shopped for a fixed mortgage you’ll notice the big 6 banks (and some other lenders) all have a table of posted mortgage rates. You’ll also notice the posted rates have a “special offer” or a “call for special offer” note. Talk to the bank staff and it’s clear that posted rates are almost always higher then what is actually offered.

So why are those rates even posted if they aren’t used?

Posted rates come into play regarding the term of your mortgage. Breaking your mortgage early will result in a penalty to compensate the lender for lost interest revenue. This is true for all mortgages (unless you happen to have an open mortgage). The key difference is that lenders calculate mortgage penalties with some subtle differences.

Have a look at your mortgage documentation to see if there is any reference to a “discount off posted rate”. If there is then Congratulations! You’re a player in the posted rate game which entitles you to paying significantly more to break your mortgage than if your lender that didn’t use inflated posted rates.

Why is this the case?

Lenders using posted rates add the discount you received from the posted rate back into the penalty calculation. Effectively your penalty is calculated as if your mortgage contract rate was the posted rate at the time of signing.

As of today the posted rate for a 5 year fixed mortgage at one of the big 6 banks is 5.14% while the “special” is 3.65% for a discount off posted of 1.35%. That is a significance difference and will add up quickly should you decide to break that mortgage.

There are a few take-aways from this:

  • Always ask your lender how they calculate breakage penalties and get the details
  • Never just walk into your bank – always consider a few lenders
  • Talk to a mortgage broker – we have access to the best rates and are familiar with lender policies around breakages

 

 

 

 

Free credit reports – what you need to know

Mortgage Tips Robert Ganzhorn 16 Apr

I’m seeing a lot more of those free credit reports from Credit Karma and Borrowell from clients. Requesting them is a good thing but there are some items you should know to clear up possible confusion.

There are two credit reporting agencies in Canada. Your credit score can (will likely) be different from each of them. Its due to the manner that each of them uses to calculate your score.

Of the two, Equifax is the one predominantly used by lenders. Not that Transunion isn’t used by lenders but nowhere near as much as Equifax is. Borrowell uses Equifax and Credit Karma uses Transunion. The moral here is to pull both – not only can the score be different but so can the actual content of the report.

And finally, you likely think that all credit bureau pulls are the same if taken from the same bureau. That’s just not the case. The credit bureau that you request is different than the bureau that I request which is once again different from the bureaus that the lenders request. The credit score can also vary between each report as well.

So what good is a free pull from these services? Although the score can be different from the lender bureau requests it still gives you a general idea of where your score sits and most importantly if the content reported on your bureau is accurate. Believe me I see a lot of errors and missing items when I request client bureaus.

If you have questions please feel free to reach out to me directly.