MORTGAGES VANCOUVER  
Tips, Advice, and Explanations from a Vancouver Mortgage Broker  

Posts Tagged ‘Canada’

What Makes a Broker Different Than The Bank – Vancouver Mortgage Broker

Thursday, March 22nd, 2012

Transcript of Video Blog:

Hi everyone. Rowan Smith from the Mortgage Centre. I want to talk today about what differentiates me, a broker, from just walking into your bank. If the only thing in the world you care about is rate then perhaps the bank is the best place for you to go. They may not have the best rate for you, though. I’m just saying that if that’s the only concern you can shop with them first.

However, there’s often many other things that we need to look at. We need to look at prepayment privileges. We need to look at can you get out of the mortgage if you need to? We need to look at how does that stack up against the competition in other financial institutions. We need to know if you’re going to live there for the next few years or if you need a line of credit as part of your package.

We need to know the sources of your income to know if you fit under specific programs that will get you additional discounts. We need to know a lot more information than just what is the best rate. There’s many questions that you can ask us as brokers and what is your very best rate while it is one of those questions it’s often not the most important.

I’m going to give you a case in point. Today I had a client come to me who had been chomping on a couple of different mortgage brokers and was getting pulled in a lot of different directions. When I looked at the situation I realized that many of the options that they were being offered didn’t even apply to them based on how they reported their income. I clarified the situation for them, had the deals packaged and arranged within a couple of hours, sent off to my lenders, and already received a response in the same day.

Now, I can’t promise a same day response every time. There’s just a number of factors that prevent that depending on individual deals. It is possible in a very clean situation. What I can do and the value I provide is not just a great rate, although I’m always going to try to get you the best rate, it’s also advice on the other elements of the mortgage and on your lifestyle. We, as mortgage brokers, are specialists on the debt side of the equation.

We’re looking out for your best interest in a fiduciary duty to try to get you the best terms, rate, and product to satisfy your needs. We’re not product salesmen. We don’t just sell the best rate like a canned product that we take off the shelf and hand to everybody. If everybody qualified for the best rate all the time they wouldn’t need us. There’s a lot of us out there for a reason and that’s because we can help provide an immense amount of value in selecting a good lender or getting a deal done in a timely fashion or under specific guidelines or times of day that your bankers can’t match.

If you or someone you know would like additional advice and would like an independent third party, which is what we are, to look at the situation please have them see me. It’s Rowan Smith from the Mortgage Centre.

35 and 40 Year Mortgages – Recent Updates

Friday, September 30th, 2011

In this video, I look at who is still offering 35 or 40 year amortizations and explain some recent changes in the market place.

Video Transcript:

Hi, everybody. It’s Rowan Smith from the Mortgage Center. It’s been a while since my last post and I wanted to provide an update on a couple of things that I get constant questions about in our market place.

Back in April when the changes the government handed down took effect it got rid of what most people thought would be all of the 35 and 40 year amortizations. So the question is, is a 35 or 40 year amortization still available? Short answer, yes. Now, the longer answer is a little more complicated… Read the rest of this entry »

Mortgage Changes – March 18 Deadline – Amortization Changes

Tuesday, February 22nd, 2011

Transcript of Video:
Coming soon!

Can I Roll My Other Debts Into My Mortgage?

Friday, February 18th, 2011

Transcript of Video Blog:

Hi everybody, it’s Rowan Smith with the Mortgage Centre. We’re going to do something a bit little different here this week. It’s where I’m going to answer one of the most common questions I receive, which is “Can I roll my other expenses into my mortgage?” So let’s look at exactly how that would go down. Read the rest of this entry »

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.

Read the rest of this entry »

What is a Subject in a Real Estate Contract?

Wednesday, October 13th, 2010

Transcript of Video Blog:

Hi, everybody. It’s Rowan Smith from the Mortgage Centre. I want to talk today about subjects. Specifically, what is a subject in a contract? So the way I like to describe it is a subject is essentially a large ‘if’ statement. So if you’re writing an offer, say $500,000 subject to you getting financing, subject to a building inspection.

So when someone says, ‘what subjects have you put on the offer?’ typically it’s going to be your financing subject, it’s going to be your subject for building inspection, it’s going to be subject for anything else that you want, verified or looked at or confirmed prior to your offer being binding. Until you as the buyer remover those subjects, the deal is not binding.

So when you are trying to make your decision as to what subjects you need, you’re going to want to consult your realtor. You’re also going to want to speak to me before you do it to know what we’re going to require for financing. That will guide us in how much time, we are going to need for that subject removal, for that deadline.

Typically I like to see five business days. Not always possible, but that’s the ideal number. A little bit more certainly doesn’t help and it will take a lot of pressure off.
So when you are wondering what a subject is, it’s the conditions to your offer.

For the Mortgage Centre, I’m Rowan Smith.

Top 3 Important Dates in a Real Estate Transaction

Thursday, October 7th, 2010

Transcript of Video Blog:

Hi, everybody. It’s Rowan Smith from the Mortgage Centre. I want to talk today about subjects. Specifically, what is a subject in a contract?

So the way I like to describe it is a subject is essentially a large ‘if’ statement. So if you’re writing an offer, say $500,000 subject to you getting financing, subject to a building inspection.

So when someone says, ‘what subjects have you put on the offer?’ typically it’s going to be your financing subject, it’s going to be your subject for building inspection, it’s going to be subject for anything else that you want, verified or looked at or confirmed prior to your offer being binding. Until you as the buyer remover those subjects, the deal is not binding.

So when you are trying to make your decision as to what subjects you need, you’re going to want to consult your realtor. You’re also going to want to speak to me before you do it to know what we’re going to require for financing. That will guide us in how much time, we are going to need for that subject removal, for that deadline.

Typically I like to see five business days. Not always possible, but that’s the ideal number. A little bit more certainly doesn’t help and it will take a lot of pressure off.

So when you are wondering what a subject is, it’s the conditions to your offer.

For the Mortgage Centre, I’m Rowan Smith.

How Are Mortgage Penalties Calculated?

Sunday, April 25th, 2010

I’m getting lots of questions about why bank penalties have fallen in the last three weeks. This blog explains the calculation methodology behind it:

Transcript of Video Blog:

Hi, everybody. It’s Rowan Smith from the Mortgage Centre. I wanted to address penalties, and interest rate differentials, and three month interest penalties and how it all works today in this blog.
I’m getting a lot of inquiries about it. There’s some confusion as to why rates have gone up and penalties have gone down. Well, let’s look at the standard mortgage terms.

For variable rates mortgages, most institutions, the way that it’s going to work is if you break the term at some point during any time; now most variables are five year terms, but some of them are three years.

That means that during that period of time, your discount or your premium on your rate will not change. For example, if your rate was prime rate plus a quarter, for five years you would always be prime plus a quarter regardless of where prime went. Up or down, you would follow it with a quarter percent.

You’re guaranteed that, so should banks go with prime plus a half or prime plus one, you’re still guaranteed to retain the prime plus a quarter throughout that five year term.

In exchange for that security, if you break that term, that five-year term, to sell your house, or you need to refinance, take equity out and end up doing it with a different lender, you’re going to pay a three month interest penalty.

That said, it’s a non negotiable. It’s going to happen at every single institution. However, the three-month interest penalty is the only one that will apply to a variable rate mortgage. In the event that you’ve got a fixed rate mortgage, it will be the greater of three months’ interest or the interest-rate differential.

Interest rate differential is a complicated formula that essentially looks at how much time is left in your term, what rate you’re paying now, what rate the bank could get on money now, and they charge you that difference. That’s a simplification, or perhaps an oversimplification of it.

But if you visualize being at six percent, and let’s say rates went down to the 3.69 they were at and you wanted to get that rate, that bank would be giving up on six percent for the remainder of your five year term and letting you out into the lower term.

So they’re going to look at their loss/profit and are basically going to charge you that amount or three months’ interest, whichever is greater.

You can guarantee that in cases where rates have gone down, your penalty is going to be dramatically larger under the interest-rate differential. Now how far down? It depends. It’s a complicated formula.

How much time is left in your term? If you’re within the last year, it’s generally only ever three months’ interest. There are a lot of different variations in how these penalties can be calculated from bank to bank to bank.

So if you’re looking at your penalty, not quite sure if the penalty is worth paying it to get the new lower rates, give me a call and I can walk through the math with you on it and make sure that you’re making a correct decision.

Also, if you’re looking at that penalty and wondering why did the penalty go down from last month when I had a quote, it’s because rates came up. That means that the bank could get a greater rate from money loaned at the same point at time.

So if you were three years into a five year term, there are two years left. The bank will compare their profit and loss of what they would get on a two-year mortgage.

Imagine, for example, that rates have gone in two years from, let me grab a number here, 2.25 to 2.9. If you were previously paying five percent, that spread, the difference between what they could be getting and what they are getting, got smaller, thus your interest-rate differential penalty will be smaller.

As you can see, there’s quite a bit to penalty calculation. If you have any questions, give me a call. For the Mortgage Centre, I’m Rowan Smith.

Mortgage Changes Continue – Stated Income Limited

Wednesday, March 10th, 2010

More mortgage changes are commented on, particularly, those for self employed people:

Transcript of Video Blog:

Hi everybody, Rowan Smith at the Mortgage Centre. So once again, there’s been another rule change that’s come down and this one deals specifically with self-employed people.

I have heard statistics, and I have nothing to back this up, but I have heard statistics that over 60 percent of the people in BC are self-employed or have some self-employment income. So, if that’s the case, this rule is going to effect a lot of people.

Previously, if you had a very good credit rating, and I mean pristine. You were able to put five percent down and if you were self-employed, you could state your income. You did not have to document it. You did have to document that it was reasonable, that that number was not just something that you fictitiously pulled out of the air; because that would be mortgage fraud.

You had to document simply that you had a business for the last couple of years, or that you’ve been in the field for a couple of years. You can’t do five percent down under that program any more. The fact is on April 19th, you are only going to be able to do 90 percent financing. You will require 10 percent down as a self-employed person, if you can’t document your income under traditional rules.

Now how many of these deals are out there and how many people are affected by this? Generally, self-employed people, I would say, they’re usually putting down 10 percent or more down. I did not get a lot of five percent down self-employed stated income programs.

I have seen, I can count on my hands in the last 40 years, so I don’t think that this change is necessarily going to affect a lot of people in the market as a whole, but it will bring some stability back again. This is the whole purpose of the government’s changes, is to prevent speculation and there has been a lot of it in the last while and some of these stated income programs have certainly been taken advantage of by some banks, lenders, and brokers.

So, if you have any questions about stated income, or if you’re self-employed and you’re thinking of buying a place and you’re not sure if you qualify under the new guidelines, please give me a call. It’s Rowan Smith from the Mortgage Centre.

CMHC Mortgage Rule Changes

Tuesday, March 9th, 2010

Hi everybody. It’s Rowan Smith with the Mortgage Centre. The last couple weeks we’ve seen a lot of announcements about mortgage changes, rules changes, and how people are going to be qualifying for mortgages going forward, especially the variable rate. And that’s one of the biggest changes and it’s something I wanted to cover today and talk about was how are variable rate mortgages going to be affected? How are people’s ability to qualify going to be affected under the new rules?

Transcript of Video Blog:

So the government has officially announced now that the rate they’ll be using to qualify people for a variable rate mortgage is going to be the five year posted rate. Presently, that’s 5.39%. Compare that to currently, with a lot of the non bank institutions and the non traditional institutions.

One of their biggest abilities to gain market share has been that they qualify people for the variable based on many times ahe three year discounted rate or a five year discounted rate. There’s various policies all over the place that vary from lender to lender to lender. Now we as brokers took advantage of that by finding the best rules that fit our client and so getting the most amount of mortgage that we could.

Now going forward, that won’t be the case any longer. The government has officially leveled the playing field. So anybody offering a variable rate mortgage will have to have to qualify at the new five year posted rate. Well, not the new posted rate, but the existing posted rate.

So let’s see what kind of difference that will have. If previously under the old guidelines, if you made $60,000 a year and just assuming that the average taxes and fees and stuff, and assuming no other debts, you’re able to qualify for $460,000 of mortgage for a variable. Under the new guidelines, that’s reduced to $364,000 that you are able to qualify for.

That’s a reduction of 20%, almost 21%, that you’re no longer able to afford. So if you’re looking for a property that is worth $800,000 in today’s market under today’s rules fast forward six months and the number of people who qualify for that is going to be dramatically reduced.

Everybody is going to be qualifying for 20% less than they do today. Now this may bring us long term stability to market, but I am going to bet that there’s going to be some growing pains from the transition of the old rules to the new.

Now when is that going to take effect? Well, April 19th is the date that this “law” as it were, however, some other institutions may move to this sooner, often they do. That’s the deadline when everybody has to be on board with this system. A lot of institutions already use this rule. Some of the big banks, the HSBC and whatnot, they already qualify you based on a posted rate.

Now they already use a three year posted rate, in many cases, and there is a big difference between a three and a five year. The whole purpose of this is to determine what can somebody afford now, and what can they afford if rates should rise. It builds in a safety net, it builds in a budget builds into the budget that rates may increase and that payments may increase and this may be better for us in the long term.

In the short term though, if you are trying to stretch to get the maximum amount of mortgage that you can, perhaps because the bank doesn’t accept your income, or you’re on a relatively new job, or there’s mat leave, or something like that coming up, you need to get on this now to qualify and purchase now. For the Mortgage Centre, I’m Rowan Smith.