Flaherty says no changes to lending

So the new 2012 budget is out, and there is nothing but crickets with regards to mortgage changes or policy changes.  The 30 year amortization got that “late call from the governor”, and is still available today.  Stated income programs are still intact, and the new immigrant program is alive and well.  So what does this all mean? Sounding like the viral double rainbow guy on You Tube.

We are not really sure. Yet.

Is it a sign that all is well in the Canadian Real Estate market, if it isn’t broke then why fix it ?? 

Or is it a case of Flaherty not wanting to throw himself under the bus, if he does nothing and everything is fine, he is the hero.  If he does nothing and the real estate market starts to fall, then it wasn’t his fault.  Only time will tell.

The problem is there is still a bus that needs a driver.  CMHC has is quickly approaching their insurance cap, with no indication of an increase in limit.  The CEO’s of the Banks wanted to see some changes evidenced by numerous news articles and BMO’s recent 25 year amortization on the 2.99% 5 year mortgage product. 

Or is it a case that the final decisions as to how CMHC will operate is being re-assigned to another department of the Federal Government.

Ottawa to toughen CMHC oversight

http://business.financialpost.com/2012/03/29/ottawa-to-toughen-cmhc-oversight/

CMHC currently falls under the jurisdiction of the minister responsible for Human Resources and Skills Development Canada. But sources have indicated the Crown corporation could soon fall under direct supervision of the Office of the Superintendent of Financial Institutions — a powerful financial regulator with the power to enforce a broad range of changes at a financial institution.

This would the same department currently addressing amendments to the Banking regulations with regards to the Banks, so maybe it makes more sense that the potential new policies that is reshaping Bank mortgage policies match the future look of CMHC.

This also gave Flaherty a chance to focus on more important issues at hand like balancing the budget by eliminating the Pesky Penny.

http://www.globalnews.ca/penny+to+disappear+from+coinage+system+minting+to+end+by+fall+budget/6442610741/story.html

And making sure I have to work for 2 more years before I can get my Old Age Security cheques.  I am sure that in 23 more years, when I actually hit 67, the new age will be somewhere around 97, and the word “RETIREMENT” will be deleted from the dictionary.

 

A little bit of humor found on line today, shows that changes in the US Housing market are affecting some of the most surprising applicants.

JB, (yes I have a 14 year old daughter), is having difficulty getting his Mortgage approved on the 9000 sq ft house in San Fernando California.

  http://www.nationalpost.com/m/wp/arts/blog.html?b=arts.nationalpost.com/2012/03/29/justin-bieber-hit-bu-the-housing-crisis-canadian-pop-star-cant-get-a-mortgage

Sounds like he needs a better mortgage broker.  If anyone out there knows JB’s personal email, please forward to me so I can see if I can help with his mortgage too.

Anyways, please don’t think that because Flaherty chose to keep mortgage/CMHC changes out of the budget that there will not be any changes coming in the future. 

There are still things that need to be addressed with regards to lending policies and Bank policies, and some of these changes are being drafted as we speak.  But everyone is keeping their cards close to their chests at the moment.

I will keep you posted to these changes as they are announced.

 

Rates….    Yes the 2.99% 5 years is gone…  Wondering if the Banks will bring it back out of spite, in reaction to the lack of change.

 

The 10 year at 3.89% is still hanging in,

My best 5 year currently sits at 3.09

And my best Variable is Prime -.25%

Line of Credit is Prime +.50% however calling all Engineers, I have a lender who is focusing solely on the engineering market and will offer the PRIME +.0% on secured credit lines for engineers only.

 

It is still a good time to look at your mortgage to make sure you are not paying more then you should.

Call me for a 5 Minute Mortgage Checkup.

Thanks,
 
David Kendall
 
Mortgage Agent
License # M08004045
 
211 York Road, Unit 3, Dundas, Ont. L9H 1M9
OAC Mortgages Brokerage License # 10928
An independently owned and operated franchise of the Mortgage Alliance Network
 
You could win up to $100,000.00 toward your Mortgage!!!
Visit our website today for all the details
 
http://www.mortgagealliance.ca/davidkendall
 
Phone : (905)529-1199
Toll Free: 1(877)-529-1199
Cell: (905)334-4404
 
Fax: (905)-628-7917
Toll Free Fax: 1(866)-805-9653
 
Notice:
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2.99 is about to go

BMO and RBC are cancelling their 2.99% effective Tonight, I still have lenders who are hanging in but we don’t know for how long.  5 year fixed going to 3.49%, an increase of a half percent.  

http://business.financialpost.com/2012/03/26/rbc-axes-2-99-discount-mortgage/

http://www.ottawacitizen.com/business/fp/rate+bank+mortgages+draws/6363424/story.html

 

You could end up Paying 4.60% or higher for your 2.99% Mortgage with some lenders

You would think in this day and age, an apple would be an apple and a mortgage would be a mortgage.

Most people focus so closely on mortgage rates that they forget to read the fine print.  It is this fine print that is often costing people $1000’s at the worst possible time.

Let’s face it when you are signing your mortgage papers for that new house you just bought, you are not really reading all the other papers too carefully. 

Most lenders try to make themselves sound the same which is why this is so confusing. 

Anyone taking a fixed mortgage will be told that there is a penalty to pay to get out of that mortgage early.

“Everyone pays the greater of 3 months interest or Interest Rate Differential (IRD)”.  Sounds simple enough.

3 months interest penalty is real simple to calculate, and is universal with all lenders..

Mortgage Balance X Rate / 12 X 3 months.  

You would think IRD is universal from lender to Lender too.  This is not the case.  There are vast differences in this calculation that significantly inflate the cost to break your mortgage. 

There seem to basically be 3 separate categories in the calculations of the rate to determine the Differential.

The Worst… The Highest IRD’s  Lender #1

These Lenders will compare your current mortgage rate with the equivalent GIC/Bond rate for the term remaining.  Some lenders who approve higher risk style deals use this style of Differential, I have seen mortgage penalties as high as $23,000 on a $185,000 mortgage.  The clients are often paying higher rates to begin with because they don’t qualify for traditional mortgages , and then the lender is using the lowest possible rate to increase the difference, and charge a significantly higher penalty.  

Next… (And the Big 5 Banks fall into this.) Lender #2

These lenders are using your “Discount” to establish the rate for the Differential.  For those taking the 2.99% 5 year fixed, the 5 year posted rate at the big 5 banks is 5.24%, so your discount is set at 2.25%.  This number becomes what determines your penalty.  Let’s speed up time and assume it is now 3 years later and all the rates are still the same, so you have 2 years left.  The current 2 year posted rate is 3.55% - your 2.25% discount means your rate to calculate the differential is 1.30%.  So take a $185,000 mortgage X (2.99-(3.55 -2.25) = 1.69%) /12 X 24 the# months left in your contract.   =  $6252.99

 

Last,  Lender #3

Lenders who do not actually have “POSTED” rates will compare your mortgage rate with their mortgage rate for the time remaining in your mortgage.  So same scenario, with the $185,000 mortgage at 2.99% with 2 years left.   The posted 2 year rate with one of these lenders is 3.15%  (this was how the 5 Big bank’s previously calculated their penalties)

$185,000 X (2.99 – 3.15= -.16%) (Because this is negative, then the 3 month interest penalty would apply. )

So $185,000 X .0299/ 12 X 3 months = $1382.87

Lender #1’s penalty is $23,000  Not a fair comparison but important to understand about these types of lenders.

Lender #2’s penalty is $6252.99 (5 major Banks version)

Lender#3’s penalty is $1382.87 

And yet all 3 lenders advertise, ”You pay the greater of 3 months interest or IRD.”

I understand it is difficult to forecast a reason as to why you might need to sell your home before maturity, and yes you can “PORT” your existing mortgage and avoid a penalty, but if for some reason you need to sell and no new house is being purchased, then your understanding of the different “Differential” policies and how they might affect you is crucial.

Something to ponder….

Paying 2.99% with a $6252.99 penalty after 3 years is the same as paying 4.60% without a penalty.  The penalty figure could be higher if you were trying to break your mortgage sooner.

So the only way you will actually get the 2.99% effective rate is if you go the full 5 years term.  This is kind of like the 0.00% interest for 12 months at Home depot as long as you pay it in full after 12 months.

So be careful of the big 5 Bank’s IRD calculations sometimes things are not as good as they seem.

http://www.mortgagebrokernews.ca/tv/the-big-story-prepayment-clarity/123579

This link shows how other brokers agree that the penalty calculations are vague at best.   

Call me if you need a rate held.    

 Thanks,
 
David Kendall
 
Mortgage Agent
License # M08004045
 
211 York Road, Unit 3, Dundas, Ont. L9H 1M9
OAC Mortgages Brokerage License # 10928
An independently owned and operated franchise of the Mortgage Alliance Network
 
You could win up to $100,000.00 toward your Mortgage!!!
Visit our website today for all the details
 
http://www.mortgagealliance.ca/davidkendall
 
Phone : (905)336-8448
Toll Free: 1(877)-529-1199
Cell: (905)334-4404
 
Fax: (905)-628-7917
Toll Free Fax: 1(866)-805-9653
 
Notice:
The information contained in this email is confidential. If you are not the intended recipient, you may not disclose or use the information in this email in any way and should destroy any copies. Oac Mortgages Inc. does not guarantee the integrity of any emails or attached files. .