What To Do In Today’s Mortgage Market

For the past few weeks we have been trying to give tips and advice to navigate the global pandemic.
The most important thing is safety. Please stay home, please wash your hands, please wear a mask when going out of your house. Designate one grocery shopper. Call the Mainstream Team for any mortgage advice or potential deals.
We have had our head office help us with the graphic included in this message and offer it as general advice.
Many of our clients are switching their mortgages, paying their penalties for lower rates. However, many clients are facing more difficult challenges including employment layoffs, reduced income or worse.

For clients who need to sell their homes. Please contact us. We will need to get a new credit application, find out what your mortgage penalty would be should you need to change lenders and what your future income/employment status will be.

For first time buyers. Your employment status has become the most important factor for lenders. Please note that if you become layed-off between the time you release your financing condition and your possession date, your mortgage MAY NOT FUND! We need to figure out back up plans or include extra precautions in your offer to purchase.

Lenders are now under a lot of stress and application queues are forming. Please allow 5 days for financing and allow an additional 4 weeks for closing.

For existing mortgage holders. Contact us directly for advice. If you have equity in your house you may want to tap into it. A full mortgage and financial review is always complimentary and we are happy to do so free of charge.
We apologize there is no video this week as we had a few technical difficulties.

All-in-one mortgages are an amazing tools for people who like to pay their mortgage down fast and save tens of $1,000s of dollars in interest.

1. Manulife One lets you consolidate your debts to reduce your borrowing costs.

Your Manulife One account allows you to consolidate all of your debts (loans, credit cards, etc. – up to your borrowing limit) at a competitive, low interest rate. By repaying your higher-cost debt from your Manulife One account, you could reduce your interest costs and become debt-free sooner.

2. Manulife One uses your income and savings to reduce your borrowing costs even further.

The best way to lower your borrowing costs is to pay down the principal that you borrowed. When you transfer your savings and/or short term investments into your Manulife One account, they go immediately towards paying down your borrowings. The same applies to your income. Every deposit that you make into the account reduces your debt, saving you interest costs until you need to withdraw funds again to pay for your monthly living expenses. Over time, what you save in interest will likely be more than what you would have earned.

3. Manulife One simplifies your banking by bringing your income and debt together.

With a Manulife One account, your income and your debt are all together. So you don’t need to write cheques or transfer funds from one account to another. This way you never need to worry about missing a mortgage payment. Plus, your Manulife One account lets you:

• Pay bills by cheque or online (including pre-authorized bill payments)
• Pay for store purchases with a debit card (including getting cash back)
• Withdraw or deposit funds at ABMs
• Plus much more.

There’s just one difference – whatever is left over in your Manulife One account at the end of the day goes directly towards reducing your borrowing costs. So all your money is working for you as hard as it can – 24/7/365.

4. Manulife One lets you enjoy financial flexibility.

Some traditional mortgages make it difficult or inconvenient to repay your debt more quickly. But with Manulife One, the debt in your Main Account is automatically reduced any time you make a deposit to your account. And, when you have extra money to deposit, such as a gift, bonus, tax refund, etc. your debt is automatically reduced. This gives you the financial flexibility to pay down your debt on your terms, not on your bank’s terms.

Manulife One also gives you the financial flexibility you need to deal with unexpected expenses or take advantage of great buying opportunities when they come up; and you don’t have to jump through hoops to do it. You can access the equity you’ve built up in your home (up to your borrowing limit) at any time just by writing a cheque, making a debit purchase or transferring money electronically.

With Manulife One, you’ve got the flexibility to repay your debt more quickly when you have extra money available and also to conveniently access that money when a spending need arises.

Watch our video and like it on YouTube and refer to our BLOG Post to Download more information.  for more information.  Please feel free to share with your clients or anyone you know looking for a mortgage.

Click the link below for our YouTube video!

If you have any clients looking for a mortgage pre-approval or mortgage advice please have them visit our website or call Peter at 204.227.2744.

COVID-19 UPDATE:

While we are all in disbelief, the world must go on.  Last week we fielded over 200 inquiries regarding mortgage options and deferred payments.  As usual,  everyone has jumped the gun.

The government, the banks, our lenders have all announced up to 6 month mortgage deferrals.   How does one qualify?  How many months is each lender allowing?  What are the criteria?….  At this point?  Nobody knows.

Lenders are being inundated with telephone calls up to 5000 calls per lender per day.  Wait time are up to 4 hours if the phone call even gets answered.  From what we have gathered so far, one must be directly affected by the Covid-19 crisis due to illness and/or employment layoff.   Each lender is looking at the borrowers individual situation on a case by case basis.

New purchasers need to be somewhat certain that their employment will continue beyond the crisis.  A layoff before possession could cause a lender not to fund your mortgage.  Realtors, you need to be aware of this fact when writing up offers to purchase.   How is Covid-19 going to affect sales contract?  That will be an ongoing question to be determined.

Existing mortgage holders.  Now is the time where you may want to refinance and pull out equity if you are able to and qualify.   We are recommending having access to 6-12 months of household income in had as we navigate through this global crisis.  Should there be enough equity to borrow against, we recommend trying to get a Home Equity Line Of Credit or simply refinancing your existing mortgage.

Finding updates or any information in the financial industry has been very frustrating.  Dominion Lending Centres has created an website dedicated to Covid-19 updates and information.  You can access the website through our website by clicking on the “Learn More” on the blue Covid-19 bar.

Please watch our YouTube video and stay safe.

Click the link below for our YouTube video!

Wow! What a couple of weeks. As covid-19 continues to spread throughout the world and the markets and economy are facing impending turmoil everyone is left wondering what’s going to happen and what is the best thing to do?
Unfortunately, we don’t have all of the answers. However, in an attempt to do our very best for our clients and business partners, we have started Virtual Mortgage Appointments where clients can book an appointment on our website and we can process their mortgage application through video conferencing.

Interest rates are dropping. You may want to consider a refinance or to get pre-approved for your next home.

As a result of Covid-19 Canadian Mortgage Insurers are rolling out a payment deferral program for up to 6mos to help ease any financial burdens. Health concerns are weighing heavily on the markets. We don’t have many details at this early juncture but will post updates as we learn more.

Watch our video and like it on YouTube and watch out for breaking updates. Please feel free to share and follow.

Click the link below for our YouTube video.

We wish everyone good health and should you have any questions please contact The Mainstream Mortgage Team.

Getting the best interest rate is the most important aspect of getting a mortgage, right?

If you answered YES, this article was written just for you.

The rate is very important and this article is going to illustrate the math and savings one can achieve with using a mortgage professional.

Before we get into the math, we wanted to let you know that in our opinion that mortgage terms are just as, if not more important that the rate.   Pre-payment privileges, penalty calculations, portability and assumability to name a few.  Some low rate mortgages are not portable and have HUGE penalties.

So when comparing rates, please compare the features and terms.

Lets get into the math!!!  #MortgageNerdsLoveMath

The best part of our job is when we are able to save a client 0.50% on their mortgage rate or more.  It doesn’t happen all the time but there are time throughout the year when it does happen.  AND IT FEELS GREAT.

The first calculation I would like to give you is the month payment per $1000.00 of mortgage.   At the time of writing, our best 5 year fixed rate mortgage is 2.34%.  The cost per $1000 of mortgage is $4.40/$1000.  So if you wanted to quickly approximate the month mortgage payment of a $300,000 mortgage, all you have to do is multiply $4.40 x 300 = $1320/month.

Wow 2.34%? That’s amazing.  What if the rate was 0.50% higher or 2.84%?  The cost per $1000 would be $4.65/$1000 per month.  So 300 x 4.65 = $1395/month.

$75 may not seem like a lot of money but it sure adds up.  The interest savings alone is over $6900 over a 60 month or 5 year term.   Not only do you save on interest, but there is more principle paid with a lower rate.  In the above example your mortgage balance will be more than $2,500 less with a lower rate.

So what’s the best thing to do?

Watch our video and like it on YouTube and refer to our “Interest Rates – 101” handout by CLICKING HERE TO DOWNLOAD .  Please feel free to share with your clients or anyone you know looking for a mortgage.

Click the link below for our YouTube video!

If you have any clients looking for a mortgage pre-approval or mortgage advice please have them visit our website or call Peter at 204.227.2744.

The Bank of Canada Brings Out The Big Guns

Following yesterday’s surprise emergency 50 basis point (bp) rate cut by the Fed, the Bank of Canada followed suit today and signalled it is poised to do more if necessary. The BoC lowered its target for the overnight rate by 50 bps to 1.25%, suggesting that “the COVID-19 virus is a material negative shock to the Canadian and global outlooks.” This is the first time the Bank has eased monetary policy in four years.

According to the BoC’s press release, “COVID-19 represents a significant health threat to people in a growing number of countries. In consequence, business activity in some regions has fallen sharply, and supply chains have been disrupted. This has pulled down commodity prices, and the Canadian dollar has depreciated. Global markets are reacting to the spread of the virus by repricing risk across a broad set of assets, making financial conditions less accommodative. It is likely that as the virus spreads, business and consumer confidence will deteriorate, further depressing activity.” The press release went on to promise that “as the situation evolves, the Governing Council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target.”

Moving the full 50 basis points is a powerful message from the Bank of Canada. Particularly given that Governor Poloz has long been bucking the tide of monetary easing by more than 30 central banks around the world, concerned about adding fuel to a red hot housing market, especially in Toronto. Other central banks will no doubt follow, although already-negative interest rates hamper the euro-area and Japan.

Canadian interest rates, which have been falling rapidly since mid-February, nosedived in response to the Bank’s announcement. The 5-yield Government of Canada bond yield plunged to a mere 0.82% (see chart below), about half its level at the start of the year.

Fixed-rate mortgage rates have fallen as well, although not as much as government bond yields. The prime rate, which has been stuck at 3.95% since October 2018 when the Bank of Canada last changed (hiked) its overnight rate, is going to fall, but not by the full 50 bps as the cost of funds for banks has risen with the surge in credit spreads. A cut in the prime rate will lower variable-rate mortgage rates.

Many expect the Fed to cut rates again when it meets later this month at its regularly scheduled policy meeting, and the Canadian central bank is now expected to cut interest rates again in April. Of course, monetary easing does not address supply-chain disruptions or travel cancellations. Easing is meant to flood the system with liquidity and improve consumer and business confidence–just as happened in response to the financial crisis. Expect fiscal stimulus as well in the upcoming federal budget.

All of this will boost housing demand even though reduced travel from China might crimp sales in Vancouver. A potential recession is not good for housing, but lower interest rates certainly fuel what was already a hot spring sales market. Data released today by the Toronto Real Estate Board show that Toronto home prices soared in February, and sales jumped despite low inventories. The number of transactions jumped 46% from February 2019, which was a 10-year sales low as the market struggled with tougher mortgage rules and higher interest rates. February sales were up by about 15% compared to January.

DR. SHERRY COOPER

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

Closing Costs Explained.

Closing costs are one of the largest variables for new home buyers, especially first time home buyers.

All three mortgage insurers require that the clients have their down payment saved + an additional 1.5% of the purchase price for closing costs.   The problem with this is, that closing costs are usually closing to 2.5% to 3%.   This is really problematic when a client finds out that they are a few thousand dollars short to close.

Closing costs include, Land Transfer Tax, Legal Fees and Disbursements, Title Insurance, Interest Adjustment, Property Tax Adjustment as well as any PST on insurer premiums.

Please ask us for our very own closing costs calculator to help calculate your closing costs or down loan our app by visiting our website.

Please watch our video and like it on YouTube and refer to our “Closing Costs Example” for more information.  Please feel free to share with your clients.

Click the link below for our YouTube video!

https://www.youtube.com/watch?v=afCGOxdR5fg&t=9s

Credit Scores & Credit Reports & How They Affect Your Mortgage Application.

A good credit score is one of the most important pieces of a successful mortgage application.   As Mortgage Professionals, we always request a full credit report at the time of application.  This allows us to:

1. Check the credit score.
2. Identify any potential challenges.
3. Fix any errors.
4. Make any recommendation for improvement.

For an insured mortgage the minimum credit score is now 620, for a conventional “A” deal 600 and for conventional “B” deals 500.   Insured mortgages are usually less than 20% down and convention deals will have 20% or more down payment.

Negative Impacts:

• High Limits and Balances
• Missed payments
• Unpaid judgements and collections
• Revolving credit facility that are over limit.

For a credit score to be considered very good, it needs to be 680 or higher out of a possible 900.   Tips to keep your credit score high:

1. On-time payments
2. Different types of credit (installment and revolving).
3. Keep balances below 50% of the limit.

The Mainstream Team are experts in repairing credit.  If you or anyone you know is having credit issues, we would be happy to give them an opinion on how to fix their credit and what steps to take.

Please watch our video and like it on YouTube and refer to our “Credit Scores & How They Affect Your Mortgage Application” for more information.  Please feel free to share with your clients.

Click the link below for our YouTube video!

https://www.youtube.com/watch?v=WFqSQC3S3_U

If you have any clients looking for a mortgage pre-approval or mortgage advice please have them visit our website or call Peter at 204.227.2744.

Minister Morneau Announces New Benchmark Rate for Qualifying For Insured Mortgages

The new qualifying rate will be the mortgage contract rate or a newly created benchmark very close to it plus 200 basis points, in either case. The News Release from the Department of Finance Canada states, “the Government of Canada has introduced measures to help more Canadians achieve their housing needs while also taking measured actions to contain risks in the housing market. A stable and healthy housing market is part of a strong economy, which is vital to building and supporting a strong middle class.”

These changes will come into effect on April 6, 2020. The new benchmark rate will be the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, plus 2%.
This follows a recent review by federal financial agencies, which concluded that the minimum qualifying rate should be more dynamic to reflect the evolution of market conditions better. Overall, the review concluded that the mortgage stress test is working to ensure that home buyers are able to afford their homes even if interest rates rise, incomes change, or families are faced with unforeseen expenses.

This adjustment to the stress test will allow it to be more representative of the mortgage rates offered by lenders and more responsive to market conditions.

The Office of the Superintendent of Financial Institutions (OSFI) also announced today that it is considering the same new benchmark rate to determine the minimum qualifying rate for uninsured mortgages.

The existing qualification rule, which was introduced in 2016 for insured mortgages and in 2018 for uninsured mortgages, wasn’t responsive enough to the recent drop in lending interest rates — effectively making the stress test too tight. The earlier rule established the big-six bank posted rate plus 2 percentage points as the qualifying rate. Banks have increasingly held back from adjusting their posted rates when 5-year market yields moved downward. With rates falling sharply in recent weeks, especially since the coronavirus scare, the gap between posted and contract mortgage rates has widened even more than what was already evident in the past two years.

This move, effective April 6, should reduce the qualifying rate by about 30 basis points if contract rates remain at roughly today’s levels. According to a Department of Finance official, “As of February 18, 2020, based on the weekly median 5-year fixed insured mortgage rate from insured mortgage applications received by the Canada Mortgage and Housing Corporation, the new benchmark rate would be roughly 4.89%.” That’s 30 basis points less than today’s benchmark rate of 5.19%.

The Bank of Canada will calculate this new benchmark weekly, based on actual rates from mortgage insurance applications, as underwritten by Canada’s three default insurers.

OSFI confirmed today that it, too, is considering the new benchmark rate for its minimum stress test rate on uninsured mortgages (mortgages with at least 20% equity).

“The proposed new benchmark for uninsured mortgages is based on rates from mortgage applications submitted by a wide variety of lenders, which makes it more representative of both the broader market and fluctuations in actual contract rates,” OSFI said in its release.

“In addition to introducing a more accurate floor, OSFI’s proposal maintains cohesion between the benchmarks used to qualify both uninsured and insured mortgages.” (Thank goodness, as the last thing the mortgage market needs is more complexity.)

The new rules will certainly add to what was already likely to be a buoyant spring housing market. While it might boost buying power by just 3% (depending on what the new benchmark turns out to be on April 6), the psychological boost will be positive. Homebuyers—particularly first-time buyers—are already worried about affordability, given the double-digit gains of the last 12 months.

Dr. Sherry Cooper

Mortgage Application Process & Required Documentation Explained

When a client is looking to get a pre-approval or doing a mortgage application for a home they just purchased the process is almost the same. Derek, Colten and I follow the same steps.

1). Get the application – The client will generally fill out our online application or meet with us in person. We collect their Names, Address, Birth Date, SIN#, Address History, Employment History, Assets & Liabilities.
2). Consent & Credit Check: We have the client sign a consent form. This allows us to check their credit and communicate their information to the lender of choice and keep their REALTOR and Lawyer informed along the process. We verify the credit score, typically we like to see a score of 620 or higher for an insured mortgage. We make sure that all payments are paid as agreed, that all credit facilities are under their limit and that any collections, judgements or other debts are paid as agreed and are reporting correctly on the client’s credit bureau.
3). Income Documentation: For employed clients we always request a letter of employment confirming the client’s start date, positions, wage/salary and GUARANTEED hours per week worked. The letter has to be on company letterhead. The letter is typically valid from 60 day from the day of issue. We will always request the clients two most recent paystubs. We verify and cross reference the information on the employment letter with the paystubs. We confirm the hours worked, the wage or salary and the year-to-date income. In some cases we will also request the two most recent years T4s. This would be to confirm overtime income or part time not guaranteed hours (we can take the lower of the most recent year or an average of the two years whichever is lower).

For self employed clients we will request the two most recent year T1 General Full Tax Returns *all pages* as well as the corresponding Notices of Assessment. We must also confirm that any income taxes owing are paid in full. If incorporated, we will require two years Accountant Prepared Financial statements (notice to reader), two years T2 Corporate tax returns and articles of incorporation and a corporate search.
4). Secondary Income Documentation: This type of income is usually Canada Child Benefit or Spousal support. For Canada Child Benefit we will request the children’s birth certificates, CCB statement and 3 months bank statements confirming the CCB deposits. For Spousal support, we will request the fully executed and notarized separation agreement and 3 months bank statements to confirm the amount deposited.
5). Down Payment Documentation: We will request 90 day bank history from any savings account, TFSA or RRSP. We verify account ownership and look for any large deposits made within the 90 day period. Typically any deposits over $2,500.00 will need to be verified or have to seed for an additional 90 days. For gifted funds we will request a gift letter from an immediate family member and confirmation of the gifted funds deposited into the client’s account. For Flex-down Mortgages, we will require a copy of the loan or credit facility used and that the funds have been deposited in the client’s account. For down payments coming from the sale of an existing home, we will require FIRM Offer to purchase, existing mortgage statement, & most recent property tax bill.
6). Existing Properties Not Being Sold – We will require and existing mortgage statement or title search and property tax bill.
The mortgage application process is simple. There is a lot of work that we have to do to make sure that the client’s are approved and won’t run into any snags. This is why we love working with our REALTORS who appreciate this process and want to make sure their clients have an amazing home buying experience.
7). Once we review all the documentation and information we perform our mortgage calculations and determine a maximum mortgage amount based on the amount of money the client is comfortable paying each month as well as a debt service ratio which typically needs to be under 44% for most borrowers. This ratio is a calculation of all of the client’s debt and housing payments divided by the clients eligible household income.
8). Once the pre-approval or approval is in place, it is very important that the clients maintain their credit standing, maintain their current employment as well as their current debt levels. This means that a client may not quit their job, change employers, buy any major purchases on credit as well as keep all their existing credit current and not miss any payments.

Please watch our video and like it on YouTube and refer to our “Documentation Checklist” for more information. Please feel free to share with your clients.
Click the link below for our YouTube video!

https://www.youtube.com/watch?v=aH3FJIIPHeE