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The case for locking in your mortgage – Bruce Coleman, Vancouver Mortgage Broker

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ROB CARRICK – The Globe and Mail

A variable-rate mortgage entails a vulnerability to possible short-term rate increases by the Bank of Canada.
(RAFAL GERSZAK FOR THE GLOBE AND MAIL)

You can’t go wrong if you respond to this week’s mortgage rate increases by locking in for five or 10 years.

But at least consider the alternative: Variable-rate mortgages sound risky in today’s volatile interest rate environment, but they’re actually a quiet corner of the mortgage world right now.

We’ve had several rising-rate episodes in the past few years, but they’ve invariably fizzled. In each case, one of the many global economic trouble spots has gone critical and caused rates to retreat. Will this latest rate spike unwind itself, too? Can our low-rate utopia last indefinitely?

Smart borrowers today work on the assumption that the answer is no. The question, then, is how to best keep mortgage costs low today while also protecting against future increases.

Let’s consider the lock-in option, first. That’s where people with variable-rate mortgages convert at no cost into a fixed-rate mortgage, and new home buyers go with a five- or 10-year fixed rate mortgage. It happens to be an excellent time to lock in, even if some banks have boosted their special five-year fixed mortgages rates by 0.2 of a percentage point this week.

The banks were responding to a big runup in the yield on the five-year Government of Canada bond, which sets the trend for five-year mortgages. But thanks to a highly competitive mortgage market, lower rates are still available. Kim Arnold, a broker with Dreyer Group Mortgages in Vancouver, said earlier this week that she was able to get a very competitive five-year rate of 2.89 per cent for clients.

“Rates are phenomenal, even with this latest increase,” she said. “It’s certainly not a bad time to lock in.”

David Larock of Integrated Mortgage Planners in Toronto sees zero urgency for locking in, mainly because of the potential for yet another global economic scare to send rates lower. Europe’s problems with high government debt levels and slow economic growth could do it. So could Japan’s rickety economic fundamentals, worry about weakening growth in China or uncertainty over the sturdiness of the U.S. economic recovery.

Low inflation is another constraint on rate increases, Mr. Larock said. “I think the Bank of Canada is probably more concerned about getting inflation to go up as opposed to going down.”

It’s this line of thinking that leads Mr. Larock to make a case for the variable-rate mortgage, where your rate rises and falls along your lender’s prime rate.

The prime, in turn, is guided by the Bank of Canada’s benchmark overnight rate of 1 per cent, which hasn’t moved since September, 2010, and is expected to remain steady until the latter half of next year.

“The prime rate moves when the Bank of Canada changes their rates, and they’re not going to jump around like the market does in terms of what happens with five-year Government of Canada bonds,” Mr. Larock said. “These bonds are subject to the vagaries of large institutional investors, and to the ebb and flow between the stock market and bonds.”

Another reason to look at variable-rate mortgages is that the discounts have improved recently. Mr. Larock said it’s now possible to get a variable-rate mortgage with a discount of as much as 0.5 of a point off prime in some provinces.

That means a rate of 2.50 per cent, which compares to a range of 2.72 to 3.29 per cent for discounted fixed-rate mortgages over five years, depending on which lender you deal with.

If you go with a variable-rate mortgage, you’re vulnerable to the short-term rate increases the Bank of Canada will eventually start using to keep economic growth under control.

Toronto-Dominion Bank’s economics department expects a half-point rise in the overnight rate in the fourth quarter of next year.

As for five-year fixed rates, they could retreat again in the weeks and months ahead if there’s another global economic scare. But TD chief economist Craig Alexander said the broader trend in the bond market is the start of a move toward more normal levels. Next year, he sees the five-year Canada bond yield at 1.85 per cent, up from 1.60. “I think bond yields are going to grind higher, but 1.85 per cent on a five-year Government of Canada bond is still incredibly low.”

The best strategy for most people today is to lock in quickly to today’s best five- or even 10-year rates (read my case for the 10-year mortgage online at tgam.ca/DqYG). As Ms. Arnold, the Vancouver mortgage broker, put it, “I don’t honestly think anyone can make a mistake by locking in.”

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Mortgage Rate Survey

A range of best rates available from banks and through mortgage brokers

Source: RateHub.ca

What your parents didn’t teach you about money – Bruce Coleman, Vancouver Mortgage Broker

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By Gail Vaz-Oxlade | Online only

As I crossed the country earlier this year promoting my latest book, Money Rules, I spoke with thousands of university and college students about what it takes to not make the mistakes their parents made. Let’s face it, my generation has done a gawd-awful job of setting an example for the young’uns who are just starting out. Here are some important lessons your parents likely didn’t teach you, at least not in practice:

Don’t spend money you haven’t earned yet. If you let yourself get distracted by new and shiny as your parents have, you’ll end up carrying a whack load of consumer debt just like mommy and daddy. Show you have some self-control. Demonstrate that you know how to prioritize. Live within your means.

Your income and your stuff don’t say jack about you. My generation has bought into the branding tomfoolery like no generation before. If you define yourself by the labels you wear, by the model of the car you drive or the amount of money you make, you’re walking in the wrong footsteps. Let’s face it, a guy who makes $100,000 a year selling stuff people don’t need isn’t a better person than the guy who makes $35,000 helping an autistic child integrate into a classroom and learn to socialize. Your actions define who you are.

How much you make doesn’t matter as much as what you do with your income. Sure, you may not make bundles of money, but if you can live a worthwhile life and make your money do what you need it to do, you’re way smarter than the Ritchie Rich with the flashy lifestyle and debt-rot at the root of his financial foundation. Live a real life and keep track of every penny.

Watch who you choose for your peer group. Once upon a time we measured ourselves against our family, friends and neighbours. (Hey, you can say we shouldn’t measure ourselves against anyone, but that’s just not reality!) My generation decided to measure how we’re doing against the people we see on TV and in magazines.  If there were no décor-porn, we’d all feel a little less like our homes constantly need upgrading. You don’t need granite counter-tops to turn out healthy and delicious meals for the family. Build a life of substance and focus on what’s really important: stability, happiness and a sense of belonging.

101 Series: Reasons to Buy Title Insurance for Your Vancouver Home

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Reasons to Buy Title Insurance for Your Vancouver Home

There are a lot of little details that you have to take into account when buying a home or condominium in the bustling metropolis of Vancouver.

One of these oft overlooked details is known as “Title Insurance.”

So, what is title insurance and why do you need it?

Title Insurance Explained

Title insurance protects you from encountering and being encumbered by a number of legal issues that can easily complicate your life and cause you to end up in a costly litigation situation.

Although you would like to believe that everything is being handled by professionals on your behalf, you shouldn’t have to concern yourself with any worry about what happens behind the scenes.

Although most home or condo purchases go through without a hitch, sadly to say this is not always the case. So, what kind of potential legal issues could you encounter if you don’t have title insurance to give you that extra protection?

Some of the potential issues you could encounter when you are buying a Vancouver property could include the following:

• Issues involving property taxes which are still outstanding
• Zoning issues
• Mistakes made by the property surveyor which is challenged by a bordering neighbour or business owner
• Other financial liens which might be attached against the property such as by a collection agency or other forms of judgements
• A fraudulent title
• Encroachment issues

So, as you can see from the above list which is not all inclusive, there are a variety of legal issues which can throw a wrench into buying your dream home.

Simply put, title insurance can provide you with a valuable form of insurance protection which can help you if you get caught in one of these types of legal entanglements.

Is Title Insurance Expensive?  

That’s the beauty of title insurance. It is not all that expensive and it covers you for as long as you own your home. I suggest you do some comparison shopping as generally speaking the prices for the insurance range anywhere from around $150.00 to $350.00, but it really is well worth your while to have it.

You should also know that many lenders will require you have this insurance coverage before you can get approved on your mortgage anyway. Even if they don’t require that have you coverage, if have taken the time to purchase the insurance it will help smooth your way through the application and approval process

You can get title insurance directly through your lender as many of them offer a policy for their clients. Your other option is to get it either directly from your insurance company or through your insurance broker. Some policies are sold as a separate rider which you can buy along with your homeowner’s insurance policy.

However you buy it, I highly recommend you consider buying title insurance for that extra piece of mind and to protect yourself from a potentially costly legal lawsuit.

101 Series: Why You Should Use a Vancouver Mortgage Broker

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Why You Should Use a Vancouver Mortgage Broker

It’s a simple fact that over 50% of Canadians use their own bank to obtain their first mortgage.

It’s a common practice adopted by many first time mortgage borrowers because it’s a convenient place to apply since they know you.

But, did you also know that if you use your bank and you accept the rate they offer, it could end up costing your thousands of out of pocket dollars because you did?

Many Canadians are under the impression that it’s better to use their bank because you are under the impression you will have to pay a commission to a mortgage broker such as myself.

Vancouver Mortgage Brokers Don’t Charge You a Fee

That’ right! You don’t pay us to do this work for you because we earn our commission directly from the lender. The commission we receive has nothing to do with any costs that are reflected on your mortgage. They pay us this commission because we brought the business to them.

The commission we make is specifically based on the size of the mortgage and has nothing to do with interest rates. Mortgage brokers have to go through a stringent process to get a license, so you know that you can expect a high degree of competent professionalism when you use our services.

Bottom line – you pay nothing to use our services!

A Vancouver Mortgage Broker Offers Greater Convenience

Let’s say you did go through your bank. You went through all the ropes and put your paperwork together. You may have met with them several times to clarify aspects of your application or to sign some papers. You have to take time off from work to meet with them during business hours.

You go through all this and what might happen? They turn down your application. So, what happens next? You have to go through all this rigmarole to do it all again with no guarantee.

By using the services of a Vancouver mortgage broker, you only have to complete all the paperwork once. Then we take over and do all the rest for you. We have access to numerous lenders and can save you a lot of legwork because we can repeat the process without having to inconvenience you with a bunch of stressful appointments.

Many people who apply for mortgages also happen to be either single or self-employed. Other applicants have less than stellar credit history. These and other issues can present new hurdles which you might not be prepared to address.

As the banks are more stringent when it comes to people in this boat, I can advise you on how to manage these hurdles with a lot less hassle.

A Vancouver Mortgage Broker Can Find You Cheaper Mortgage Rates

We not only have access to many different types of lenders, we are also apprised by our lenders about any changes in interest rates on a daily basis. We have hands-on information on the most updated mortgage rates from all our available lenders.

We can find you rates which are cheaper than traditional lenders such as banks. This means we can save you money by seeking out and finding you the best rates.

Why Should You Use a Mortgage Broker?

It boils down to 3 basic reasons. We don’t charge you anything. We offer greater convenience to ease you through the mortgage process. We can find you better rates and have access to multiple lenders.

Need a Vancouver mortgage?  Give me call and let us help!

Reasons to Avoid FSBO (For Sale by Owner) – Consult with a Vancouver Mortgage Broker

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Reasons to Avoid FSBO (For Sale by Owner)

For Sale by Owner or FSBO might sound like a good idea on paper but it could it end up costing you big time.

One of the major appeals of FSBO is that people believe it will make them more money because you don’t have to pay a commission to a realtor. Sounds like a great idea, because how hard can it be?

You probably think all you have to do it advertise the home on some website, put a “For Sale” sign on the yard, or an ad in the local paper. Prospects drop by and someone falls in love with your house and you sell it. It sound simple but here a few hard facts you should consider before you attempt to do so.

You Will Not Get a Good Real Estate Listing

Realtors have one significant advantage over you and that’s because only a licensed real estate broker can access the Multiple Listing Service which is also known as the MLS for short.

You can’t! And, that is a big disadvantage because this is actually what most serious homebuyers use when they are looking to buy a home. Also, if you think you’re going to be avoiding out of pocket expenses then think again. Listing you home on any other website or in the papers is going to cost you money.

FSBO’s Aren’t Very Reputable

Credibility is a very big concern when you are investing $500,000 in buying a new home. The Vancouver real estate market is hot which means home prices are high. Buying a home is the biggest single investment that most people make in their lifetime.

Let’s face it – is a new buyer really going to believe you when it comes to making a full disclosure about any issues they should know about when they are buying a house from a complete stranger? Although I have no doubt that most people are relatively honest, it’s just bad business if you don’t disclose everything that’s negative about your home.

You could end with more costly litigation issues because you could end up being sued, and it might not even have been your fault. The issue or problem might only have appeared after you sold the house and you had no legitimate knowledge about it. You might escape having to pay a judgement, but there’s still no avoiding the costly legal fees involved.

 Do You Have the Time It Takes to Sell a Home?

Real estate agents work wacky hours. They work when their clients need them and not the other way around. From evenings and weekends, when a client wants to see a house, it’s their job to do their best to accommodate that client.

And, if you and your partner are working, will you be able to take the time from work to show someone your home? Are you prepared to give up your evenings and weekends to accommodate a prospective buyer?

Are you really going to be getting quality viewers or just a bunch of time-wasting curious tire kickers who have nothing else to do? A real estate agent gets a feel about their clients and in most instances their clients are serious about buying, looking at and possibly putting in a bid on your home.

Another question you might want to ask yourself is whether you really know what it takes to prep a home for sale? If you don’t know what you’re doing and what it takes to sell a home, then you could end up wasting a lot of your valuable time and getting nowhere in the end.

Real estate agents are trained at their job and know what they’re doing so save yourself a bunch of headaches and hire a professional to the job for you.

101 Series – How to Buy a Vancouver Home with a Poor Credit Score – Bruce Coleman Vancouver Mortgage Broker

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How to Buy a Vancouver Home with a Poor Credit Score

Spending beyond your means is common today. Sometimes you get financially jammed up and get behind on those blasted credit cards and other bills.

This scenario can negatively affect your mortgage application. If you’re still struggling to make ends meet then buying a home should maybe be put on hold.

But, if you’re back on track and caught up on your debts then maybe you might be ready to tackle a new home. Your credit score is a reflection of how well you can manage the responsibility of taking on a mortgage.

There are two strategies that you can adopt to improve your chance of getting approved by lenders as the new B20 regulations (Underwriting Guidelines for Residential Mortgages) introduced by the Feds have made getting approved even more of a challenge.

Worst Case Scenario – Recent Bankruptcy

If you’ve recently declared bankruptcy or have made a credit proposal, then your best strategy to use in not only getting approved but qualifying for a decent rate is to hold off and wait it out for awhile.

Your only option at best in these circumstances when it comes to applying for Vancouver home mortgages is to hope that you get approved for a subprime rate. These were somewhat easier to get before the new regulations.

Right now however, it’s a tough sell as many lenders have tightened their belts and are performing a more rigorous due diligence when it comes to applications.

The majority of conventional lenders won’t even give you the time of day until you’ve managed to get 2 years beyond your bankruptcy discharge or credit proposal. You will also need to have qualified for at least 2 sources of credit that have at least a $1000 or $2000 limit with a 2 year track history of paying your debt on time.

If this fits your situation then you might be concerned how you are even going to get approved for any credit card. Well, you can as there are credit cards which you can apply for and these are called “secured credit cards.”

These “secured” credit cards require a security deposit before you are approved but they can help reinstate your credit rating and get you back in financial shape again. You also want to make certain that you choose a lender which will guarantee they will refund your security deposit after a certain period of time.

To rebuild the confidence in lenders you need to make sure that all your bills are paid on time including your household bills so you can rebuild your credit score again. You have to make a plan and stick to that plan and above all else you must be patient.

The More Expensive Approach

Even though you have declared bankruptcy or going through the process of a credit proposal it could be that your financial situation has improved so dramatically you believe you can swing a mortgage. You want a home now, but is it possible even with your circumstances?

It’s by no means impossible but you better be prepared to pay the price. Your best bet will be with a subprime mortgage and that’s going to mean higher interest rates. You will also have to be prepared to put down a fairly substantial down payment of at least 25% if not even more before a lender will give your application any credence.

You may also have fork out between 1 – 2%, and maybe even more for a broker or lender’s fee.

It’s a lot tougher to find subprime mortgages but they are out there.

If you got the cash for a down payment and are still determined to buy a home then you most definitely want to use an experience mortgage broker like me to evaluate and assist with your particular circumstances.

Bruce Coleman, Vancouver Mortgage Broker

101 Series: Tips for the First Time Home Buyer – Ask Bruce Coleman – Vancouver Mortgage Broker

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Buying a home for the very first time can be both very daunting and stressful. The investment and expense can be significant and for many people it is the biggest financial single investment most of you will make in your lifetime.

Careful financial planning and preparation is the best way to make the process a lot more painless and ensure your success in securing a Vancouver home mortgage.

Advantages of Home Ownership

The first advantage of owning a home is that you won’t be flushing all that rent money away. Although housing prices do fluctuate they do not do so anywhere near as drastically as the whacky world of the stock market.

With stock market investments, you can expect the Feds to grab up to half the money you make. With a home purchase however, as you make money through a combination of appreciating house prices and by building equity, the profit you make is all yours to keep.

You can also increase the potential profit on your home by completing some quality home renovations. Some renovations such as updating your kitchen and modernizing your bathrooms actually give you a very decent ROI (Return on your Investment).

Another advantage is that is you can also borrow against the equity that you have built in your home such as through a second mortgage or through a reverse mortgage such as CHIP (Canada Home Income Plan).

The money you borrow can be used in a variety of ways such as paying for your kids’ college tuition or taking that dream trip you always wanted.

The bottom line is that investing in a home is a good investment as it provides you with a number of advantages that wouldn’t be available to your otherwise.

Preparation Tips for a First Time Home Buyer

The most pressing consideration about buying a new home is how comfortable you are in taking on the financial responsibility. You want to feel comfortable having long term employment prospects and whether you would be able to cope if you or your partner lost your job.

You can use a mortgage calculator to help you look at a variety of scenarios. A calculator will give you an idea of the how long a term or amortization you will need as it compares to your down payment. It will also help you with budgeting.

Most creditors look at what is known as your “debts service ratio” which is how much of your income would be used to towards all your household debts such as a mortgage payment, property taxes, utilities and other personal debts. The maximum amount accepted by most lenders comes in around 32%.

Your next big consideration is the amount of your down payment. If you have less than 20% of your available savings to use for a down payment then you will also have to obtain mortgage insurance such as through CMHC (Canada Housing and Mortgage Corporation). This is an additional cost on top of you mortgage payment.

You also have to keep in mind the amount of closing costs involved in going through the mortgage process. Closing costs entail legal fees, appraisals, a home inspector and other costs which can work out to about 1% to as high as 2 1/2 & of the purchase price on your new home.

Ready for Your First Home?

Although you might be tempted to simply go through your bank, this can may not as advantageous as you think. You may not be approved or you may not be getting the best rates. A mortgage broker such as myself has access to dozens of lenders and we can walk you through the process and make it a lot less stressful. We may even find you better mortgage rates which can save you a ton of money over the life of your mortgage.