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Tips, Advice, and Explanations from a Vancouver Mortgage Broker  

Posts Tagged ‘best mortgage rates’

Mythbusting Mortgages 4 – Tricky Bank Advertising Techniques

Friday, February 11th, 2011

Transcript of Video Blog:
Hi everyone. It’s Rowan Smith at the Mortgage Center. I want to address one of the most common myths that I receive questions about. That’s when a client goes into their bank and is told that they are going to be given 2.2 on a five year mortgage. So 2.2 would be the interest rate. The client comes to me, “What can you do on a five year fixed interest rate?” I say, “3.59 or 3.69.” They go, “Wow, well my bank is offering 2.2.”

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Mythbusting Mortgages 3 – My Bank Will Finance a Former Grow Op!

Friday, January 14th, 2011

Transcript of Video Blog:

Hey everyone! Rowan Smith at the Mortgage Centre. This week we’re doing Myth busting No. 3. This week’s myth is the old: “My bank did a former grow op property for me before so they will again.” That’s not necessarily the case. The industry hasn’t had this problem for that many years, at least not that they’ve been aware of. Properties now being branded as a former grow op in the property condition disclosure statement or in some places even on title has caused lenders to re think how their lending policies are when it comes to former grow ops. They don’t even say why, but what’s changed?

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Mythbusting Mortgages 2 – 35% Down? Who Needs a Job?

Tuesday, January 11th, 2011

Transcript of Video Blog:

Hi everybody! It’s Rowan Smith with the Mortgage Centre. We’re doing Myth busting #2 here and another one I want to address is the myth that if you have 35% down you don’t even need a job. That is patently incorrect!

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Mythbusting Mortgages 1 – I Don’t Have to Prove Income

Friday, January 7th, 2011

Transcript of Video Blog:

Hi everybody! Rowan Smith with the Mortgage Centre. We’re doing a Myth-busting series here. I’m going to do a 10 part series that I’m going to release over the following weeks. So, I’m just going to address a number of different myths within finance and real estate.

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Down Payment Rules and Guidelines

Wednesday, January 5th, 2011

Transcript of Video Blog:

Hi everybody, it’s Rowan Smith with the Mortgage Centre. I want to talk today about down payment confirmation. I get a lot of questions about this. People concerned with why we’re asking for so much detail, why we’re asking for so much paperwork, so I’m going to address that today.

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New Immigrant Mortgages in Canada

Tuesday, January 4th, 2011

Transcript of Video Blog:

Hey everybody, Rowan Smith with the Mortgage Centre. I’m going to talk right now about new immigrant mortgages. There’s a lot of confusion out there because there’s really two types of programs. First type of a program is one where a person can document their income here in Canada, they have a job and they’ve established credit. They may have been here for a couple of years. Second type of person is very new to the country, who maybe doesn’t have permanent long term employment and doesn’t have a credit rating here in Canada.

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Non Resident Mortgages in Canada

Friday, December 31st, 2010

Transcript of Video Blog:

Hi everybody, it’s Rowan Smith with the Mortgage Centre. Today I’m going to talk about non-resident mortgages. So a non-resident is somebody who is defined as not living within Canada but trying to buy real estate here.

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Is It Time To Re-Do You Variable Rate Mortgage?

Wednesday, November 10th, 2010

Transcript of Video Blog:

Hey, everybody. It’s Rowan Smith with the Mortgage Centre. What I want to talk to you about today is getting out of your existing variable rate that you may have got at a higher rate than is available today, getting into today’s lower rates. Let’s look at what happened.

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Vendor Take Back Mortgages – More Details…

Tuesday, November 9th, 2010

Transcript of Video Blog:

Hi, everyone, Rowan Smith with the Mortgage Centre. I want to talk today about vendor takeback mortgages. I’m getting a lot more inquiries no them, and there’s a fundamental misunderstanding out there about how they apply and whether or not you can really use them.

A lot of the no-money-down programs, Carlton Sheets and all these other guys that are out there, have been using vendor takeback mortgages. Those programs are predominantly American. Now the technique does work here, but it’s not as simple as people think.

What they’ll often say to me is, “Rowan, I want to buy a $400, 000 house. I don’t have the 5% down, so I want to take a vendor takeback for the 5%.” What that means is that the seller is loaning you the 5% down payment.

Sounds good. The only problem is, it’s not allowed. You can’t do it under Canadian banking systems, because to do 5% down, the person who’s got the first mortgage either has to get CMHC, Genworth, or Canada Guarantee in mortgage insurance, most commonly CMHC.

CMHC is not going to allow you to borrow 5% behind their 95% financing. Part of it’s just simple risk. Knowing that you have absolutely no money in the deal and have nothing to lose if you walk away doesn’t give them a lot of security that you’re going to make your payments.

But secondly, you end up borrowing more than the purchase price. And the reason is, when you pay, put 5% down, you’re going to be looking at a mortgage insurance premium through CMHC for Genworth or Canada Guarantee of anywhere between 2.75% and 3.35%, depending on what program you buy through.

So if you’re looking at 95% financing plus the additional funds for the premium, you’re up at 98% financing. Now you’re going to add your 5% that you’re getting from the vendor. So you’re up over 100% of financing. They’re simply not going to allow that.

And while the math may make good sense, or it may make sense to your realtor or advisor why you can do this, it’s realistically not going to happen in Canadian real estate. I’ve seen too many applications where people have tried to do a vendor takeback, and it’s really considered a dirty word in the industry at this point.

So if you’re thinking of a vendor takeback, the only time you can really do it are on commercial transactions or when you already have a very sizable chunk of money from a percentage standpoint, 20%-plus for example, and are looking to maybe top that up by borrowing a bit back from the vendor.

There are number of ways we can structure this, and I can help you do that. If you have any questions on vendor takebacks, please call me with your situation, let me go through it with you, and we’ll see if we can make it work.

For the Mortgage Centre, I’m Rowan Smith.

Penalties and Mortgages and how Non-Banks Can Help

Friday, November 5th, 2010

Transcript of Video Blog:

Hi, everybody. It’s Rowan Smith with the Mortgage Centre. I want to talk today about interest rate differential penalties, mortgage penalties, and non banks. The reason I’m bringing this up is a lot of people have said to me, “Rowan, how come you don’t fund more mortgages with TD Bank or Bank of Montreal and all the big banks?”

The reason is, amongst many other things, but one of the primary ones, and the one I want to talk about today, is their penalty calculation. In my experience, the big banks have a more punitive form of interest rate differential calculation than that that we get through a non bank.

The reason being is most financial institutions, most of the big banks, will base their penalty that you’re going to pay on a fixed rate mortgage off of their posted rate, which is much higher than, say, a discounted rate. The difference right now can be the difference between 5.29 being posted and 3.49 or thereabouts being their discounted rate.

Well, if you were to add that up over five years, the difference between 5.29 and 3.49, figure out what that portion is, it can be pretty huge. So you want an institution that’s not going to use a high posted rate or not going to use a high rate on their IRD, interest rate differential, penalty calculation.

Now most non banks don’t even have posted rates, so when they’re calculating their IRD, they’re basing it off of a much lower rate. In other words, you’ll be paying a penalty between 3.79 and 3.49 for the remainder of the term versus 5.29 and 3.49. It’s a very big difference between the way those penalties are calculated.

This is all nuts and bolts stuff that goes on the back end. You won’t be aware of it until you go to pay out your mortgage and are horrified by the penalty with your big bank. So if you’ve been dealing with the same institution for many years and you’re fiercely loyal to them, understand they are in it to make a buck, and they’ll make it on you.

For the Mortgage Centre, I’m Rowan Smith.