Thursday, October 28, 2010

Mortgage broker channel to remain strong: Deloitte

According to a report by Deloitte, the mortgage broker channel is to remain strong in Canada. The report states that in 2009, mortgage brokers initiated 38% of the total volume of mortgages in Canada. We are evolving from a "lender of last resort" in years past to a viable option for borrowers with good credit and income that want a competitive interest rate and good service from their mortgage professional.
A few notable trends the Deloitte report predicted:
-Mortgage brokers will evolve from “rate shoppers” to “advisors.”
-Major banks will continue to compete against broker business.
-Superbroker networks will continue to consolidate. In 2005, almost 70 per cent of Canadian mortgage agents were employed by one of five broker houses. Since mid-tier networks have emerged, the figure tops out at 85 per cent.
-Niche lenders with specialized product offering will emerge through the broker channel, increasing options for new immigrants, the self-employed and individuals with credit challenges.

Wednesday, October 20, 2010

Say it like it is!

Here’s a very cool video from a BC broker. He is so right! I couldn’t say it better myself!

The rate game

I’ve said it before and I’ll say it again. Rate isn’t everything!
I’d like to take a moment to discuss BMO’s “rate special”. It’s a five year fixed mortgage at 3.49%. The rate sounds great, right? Almost unbelievable! My friends, there are a few catches to this one according to Canadian Mortgage Trends. I’ll discuss them below.
1. You are not able to break this mortgage to move to a new lending institution. This is HUGE! If you are not free to break this mortgage and move on to someone else in 2, 3 4 years (or whenever you just plain feel like it) where does that leave you? Do you think you’ll have any negotiating power? I think not.
2. Pre-payments are limited to 10%. Folks, this is the lowest in the industry. I don’t think I have a single lender that has pre-payment privileges that are this bad. Most lending institutions have pre-payment privileges of 15%-25%.
3. Your amortization is capped at 25 years. While this is fine and dandy for some, it’s not for everyone. A lot of first time buyers want a 35 year amortization to keep their payments low for the first few years. The nice thing about a 35 year amortization is that you can pay extra every month (with your lender’s nifty pre-payment options) and can actually make your mortgage payment as if you had a 25 year amortization. The best part? If you have a rough couple months (job loss, have a baby etc) you can always revert back to the 35 year payment. Options are nice to have!
4. 3.49% is not really that great! Let’s compare a mortgage of $200,000 using BMO’s rate of 3.49% and my lender’s five year normal, great rate (no silly pre-payment caps, amortization caps or choiceless contracts) at 3.59%. With BMO your payment would be $997.49, with my lender $1,008.06. That’s a whopping difference of $10.57 a month! Granted, over 5 years that’s $634.20 but you have options, choice and an overall better mortgage in my humble opinion.
What annoys me the most is that the Bank of Montreal just doesn’t provide any of the nitty gritty details on their website!
I am constantly dealing with individuals that only shop by rate. This is a perfect example of why that is a bad idea and why there are several other factors to consider!

Tuesday, October 19, 2010

No news is good news...

In an announcement earlier today, the Bank of Canada left their overnight target rate unchanged. What does this mean? The prime lending rate will stay as is, at 3.00%. For anyone with a variable rate mortgage this is welcome news as the last three rate announcements have all included rate increases. If you were to take out a variable rate mortgage today on a five year term you'd receive a discount of .70% off the prime rate. This works out to a rate of 2.30%. Not too shabby if you ask me!
If you have any questions about variable rate mortgage options please don't hesitate to contact me!

For more information on today's rate announcement, please visit the Bank of Canada's website.

Monday, October 18, 2010

TD's Collateral Charge

Here is an article I received this morning from Axiom Mortgage Partners regarding a change TD has recently made to the way they register mortgages. This article discusses the pros and cons of the new registration policy:

This week TD is changing the way they register their mortgage charge. As of October 18, 2010 mortgages will now be registered as a collateral charge. TD believes that this will be a positive change for their consumers. I am not certain that I agree. Lets take a quick look at the facts and the pros and cons.

Mortgage will be registered as a collateral charge.
Mortgage can be registered in an amount equal to 125% of the value of the property.
According to TD's information releases:
The flexibility to register the collateral charge for a higher amount than the current loan agreement so that if a customer wants to increase their mortgage in the future they can reuse the existing collateral charge and not incur any new registration fees
The flexibility to switch to another lending product by using the existing collateral charge without incurring registration fees.

Well, come maturity a borrower will no longer have the option to "switch" their mortgage to another lender. The charge will have to be discharged in full and a new mortgage placed. This means it makes it much more difficult and costly to move a mortgage at renewal.
Depending on the wording of the collateral agreement, all of a customer's credit facilities at TD may be covered by the charge. This could mean that if a borrower wanted to discharge the mortgage they may also have to pay out other TD credit items such as Visas etc.
Talk to your TD rep to get their take on what this means to you and your clients.
-Axiom Mortgage Partners

Wednesday, October 13, 2010

MCAP re-launches it's Home Account!

A couple years ago MCAP pulled the plug on its popular line of credit mortgage during the global financial crisis. I think it’s a positive sign of the times that they have re-launched this product and I’m sure it will be a product very popular with mortgage brokers.
Here are some of the details:
-The rate on this mortgage will be prime +1.00%
-The product will be fully open
-5, 10 or 25 year interest only periods available
-Minimum beacon score 650
If you have been considering tapping into some of the equity in your home please contact me and I’ll give you an overview of the refinance options available today!

Tuesday, October 12, 2010

Changes to TD Mortgages on October 18th

The Globe and Mail has published an article regarding some changes TD has made to new mortgages registered after October 18th 2010. I received a bulletin last week about the change TD Bank is making to the way they register a mortgage on the title to a property. Mortgages will now be registered as a collateral charge on title. The benefit to the consumer is that TD can now register a charge up to 125% of the home’s current value. This doesn’t mean you can access the 125%, it means that if property values go up and you want to get a line of credit or increased mortgage on your home it’s basically ready to go! The bank will do a few checks and balances before they approve it but the real savings for the consumer will be that they will not have to see a lawyer or re-apply for an increased mortgage.
The downside? This makes it much harder for you to switch banks when your term is up. Having less choice isn’t good for anyone! The article states, “unlike traditional mortgages, the collateral mortgages are difficult to transfer from one lender to another, because they must be paid in full to be cancelled. That means if someone wants to change lenders, they need to renegotiate from scratch”.
This recent move by TD has angered mortgage brokers across Canada according to the Globe and Mail article.

Read the full Globe and Mail article here:
TD overhauls mortgage program as housing market slows

Friday, October 8, 2010

Brokers and Bankers

Well, it’s Friday before the Thanksgiving weekend and what better time to have a little rant! I just came across this article which covers a topic that is near and dear to my heart: Bankers calling themselves Mortgage Brokers. To be fair, Bankers aren’t the only ones to blame. I’ve heard many Realtors and consumers talk about their “broker” when in fact they are speaking about a bank employee. Some bank employees specialize in mortgages only and work from home and on the road. Just because they don’t work in a bank branch doesn’t make them a mortgage broker! They are simply road reps for the bank.
I think it is very important to label things correctly. Mortgage Brokers and Bankers are two very different things. Bankers are employees of the institution they work for. They can only sell mortgage products from their particular institution and they are not licensed by a regulating body. Mortgage Brokers and Associates, on the other hand, actually act as a broker in a transaction. They work with more than one institution and are able to set up mortgages at a variety of institutions. Mortgage Brokers and Associates are regulated by provincial licensing bodies and the only individuals that are allowed to “broker” a mortgage are individuals that are licensed! In Alberta, the licensing body that regulates Realtors, Mortgage Brokers and Associates as well as property Appraisers is RECA.
Please read the article below for more information! (This article is written with a BC perspective but a lot of the information pertains to Alberta as well).