2016 Mortgage Trends

Mortgage rates can go low again this year, just like it did last year when it was not supposed to; but is this all we’re to expect for 2016? Obviously not! Below are 2016 mortgage trends you’ll have to watch out for.

A Private Lending Rebirth?

Call it a mini renaissance if you will but it is clear that 2016 is the year for private lenders. Banks are getting pickier regarding who they lend money to since government mortgage has been tightening but things are going the opposite direction for private lenders. It will be easier for private mortgage investments corporations to get their hands on some capital with new regulations, thereby giving them more money to lend. There will be more competition for borrowers who can’t qualify for a bank loan so private lending rates are bound to drop while the amount available for lending increases. This can encourage bundling (essentially getting a second mortgage), leading to shadow lending activity that policy-makers will surely monitor closely.

Possible Increase in Missed Payments?

New Rules in the mortgage market leads to tighter lending rules and a safer housing market, but with world economy slowing down and oil plunging down, quite a number of Canadians might be facing unemployment this year. Losing jobs means lost income and not making enough to cover mortgage payments. The number of people who are behind their mortgage is at only around 27 out of every 10,000 borrowers but that might change to a higher ratio in 2016.

Cold and Hot Housing Markets

Oh yes, they will definitely persist this year! Numbers might be a little bit skewed with the national home price average hitting another record. However, it should be noted that prices are actually 4.7% lower in 2015 as compared to 2014 if we’re to take British Columbia and Ontario out of the mix.

Hot and cold housing markets largely depends on geography. Even with higher required down payments, Vancouver’s and Toronto’s housing markets will still be piping hot while the weaker markets will surely be showing a noticeable dip in sales of higher-end homes. Needless to say, a more conservative appraisal is to be expected for homes costing more than $500,000 if you’re refinancing in the weaker markets.

All Time Mortgage Rate Lows

Unless the economy surprises us with a rebound, we can expect mortgage rates to be at their all-time low this year (at least in recent history). However, rates may not go as low as they could go because government guarantee fees are being raised in some places like Ottawa, making banks more careful and thereby holding on to more capital as a security measure if mortgages go bad.

Perceived risks will make investors try to compensate by demanding higher returns, making borrowing from banks a more expensive process for the borrower. Perhaps we really are going to witness private lending renaissance; making this year as the best time to invest as a private mortgage lender!

Interested in being a private mortgage lender or perhaps looking for one? Contact the best mortgage brokers in Toronto! Call us at 1-866-820-1818 and we’ll answer all your mortgage questions the best we can.

Financing Your Home Remodeling

Years ago, borrowing money to remodel your kitchen or add new improvements to your bathroom meant going to your local bank, speaking to the loan officer, and hoping for positive news.

Today, you have myriad options to access cash, and the invaluable help of mortgage brokers to help you locate a good loan. However, you still need to understand your options and make an informed decision.

Here are some tips.

1. Start off by determining the fund amount needed to get started on the project, and how much you can afford to borrow

2. Narrow down your loan options to those that meet your requirements

3. Look for lenders that are most likely to provide the kind of loan you want How do you determine the borrowing amount? Get an accurate estimate of how much your project will cost. Offer a firm bid to the contractor you hire, breaking down costs into materials and labor.

Add about 10 per cent for any ‘extras’ you may need to pay. Include equipment rental fees and permit fees into your calculations. You will also have to assess how much your lender may be willing to loan. This will largely depend on factors like the LTV (loan to value ratio), your credit rating and income.

When you take out a loan for financing renovations, two important aspects to consider are the interest rate and the loan term. Decide how long you’d like to carry the loan, and the type of rate – variable or fixed – you are more comfortable with.

With clarity about these basic elements, you can start looking for matching borrowing solutions and products.

How do Fixed Rate Mortgages Work?

Fixed rate mortgages can be packaged just as a Canadian fixed rate mortgage or as a hybrid mortgage that converts to a variable rate mortgage (aka ARM or adjustable rate) after a period of time. This means that there is a wide range of fixed rate mortgages that you can find on the market; you’ll want to speak with one of our Toronto mortgage brokers to make sure that you find the right solution for you! Mortgages in Canada are much different than American or even British ones; ours have smaller terms and done right can be paid off much faster than other types of mortgages.

What is Fixed Interest?

Fixed interest means that your rate today should be the same rate as tomorrow and all through your mortgage term. A term is how long you have to pay the current lender, while an amortization period is the life of your loan. So you can have a 10 year term with your lender on a mortgage that has a 25 year amortization period. You’ll want to make sure each time your mortgage comes up for renewal that you can get the best terms possible. This means you’ll want to work with one of our Toronto mortgage brokers to make sure that your fixed interest mortgage is exactly what it seems.

What is the Difference Between a Fixed Interest Mortgage and a Hybrid Mortgage?

One of the newest types of mortgages being offered to Canadians today is something called a “hybrid mortgage”. These give people the option to have the benefits of a fixed rate mortgage now (or later) and the flexibility of a variable rate mortgage at the same time. Some are structured where the fixed rate term comes first, while others will structure it to have the ARM part first and the fixed rate term begin later. It will really depend on what mortgage lender you’re working with and the kind of credit you have. Just remember that just because you have bad credit doesn’t mean you should get a bad loan!

Is it Right for You?

A fixed rate mortgage is great for most people in most situations. They allow you to lock in the best interest rates in modern history right now and reap the benefits of it later. You don’t want to end up with a mortgage that is yo-yoing up and down because it looked like a fixed rate mortgage on the surface; this is why you want to talk with a Toronto mortgage broker like us to make sure everything is on the level and you’re getting the mortgage that is right for you.

If you want to get a great mortgage that’s tailored to your needs, it’s time to talk to one of our Toronto mortgage brokers. We’ll help you find the right mortgage and the right price, and we’ll help you make sure that you’re getting a solution that’s tailor fitted to your needs, not the other way around!

How to Prepay Your Mortgage

While no one can prepay their mortgage up front (and if you could, what would the point of getting a private mortgage be?), but figuring out how to pay it down quickly and pay it off early is a skill you’ll need to master from the start of your mortgage. The longer it takes you to pay off your mortgage the more interest you pay, and the more interest you pay the more the lender makes. If you want to get the best deal, just ask any of our Canada mortgage brokers: they’ll tell you that paying off your mortgage means big savings.

Can You Afford to Prepay?

The first thing you need to ask yourself is can you afford to prepay your mortgage? Maybe you’re taking the 25 year option because you really, really need lower payments. Not everyone can pay off their mortgage early; since a private mortgage (or any mortgage) can be the largest debt we face in our lifetimes, it’s important to be honest and upfront with yourself about how much you can afford to pay.

What’s Your Interest Rate?

Now you need to figure out your interest rate on your mortgage and how much you have left on the balance. You’ll usually find this on your statement, but if you can’t you can call your lender and find out.

Check Out How Much You’re Paying

You can find hundreds of mortgage calculators just by searching for them on Google.

From here you’ll be able to calculate how much and how long it’ll take to pay off your home at the current rate. This way you’ll know how much you can up your payment and how long it’ll take after you change your situation.

How Much More Are You Going to Pay?

Now you have to figure out how much more you can realistically pay.

You can choose to pay a percentage of your monthly income extra, usually $100-$200 on top of your monthly payment. It might not seem like much but over time it can really add up. Once you pay off another debt you can snowball that amount on top of your private mortgage payment each month, paying it off faster.

If you get a raise, you can pop the entire amount into your mortgage instead of buying yourself something pretty. If you do this your monthly payment will drop drastically, but you’re going to want to keep paying the amount you paid before. This way you’ve not only cut out a big chunk of what you’ll have to pay in the future, but you’re just that much closer to paying off your mortgage.

It can be hard to figure out how to pay it off early, but working with us as your Toronto mortgage broker means you get help to set up a payment plan to get things paid off in no time. Give us a call today and see what we can do for you.

Fixed Rate Jumbo Mortgages are Back

In both conventional and private mortgage markets, fixed rate jumbo mortgages are back – but what does this mean for you? Last year you would have been hard pressed to find anything over $400,000 at a fixed rate; the Bank of Canada’s insurance arm defines a jumbo loan as anything above $450,000. But with home sales flagging and home prices rising, you’ll find it’s a lot easier to find a jumbo loan at a fixed rate under $1m these days. Here we’re going to talk about why fixed rate loans can be better and how you can find the one that’s right for you.

What is a Jumbo Mortgage?

Jumbo mortgages are large loans meant to help people buy large homes – but with home prices rising across Canada they’re becoming more and more the norm. One thing that’s awful about jumbo mortgages is that until earlier this year you would be hard pressed to find one that wasn’t VRM or variable rate mortgage.

If you’re not from Canada, this is the same as an ARM; they will float up and down with the prime and usually enjoy a really low interest rate the first few years. Depending on how your mortgage is structured the pain could come in 2, 5 or even 10 years from the time your loan is originated. This is where we come in!

Understanding Fixed Rate Interest

As Toronto mortgage brokers we’ve seen it all and we know what you have to do to get the right mortgage. Most will want to try and find a Canadian fixed rate interest mortgage. These mortgages won’t float up and down with the prime like their VRM cousins. The rate that you lock in now will generally be the same rate that you get for the life of your loan, but you’ll want to make sure you work with one of our Canada mortgage brokers so you know that you’re getting the best deal.

Sometimes Maturity is a Bad Thing

When looking at VRM mortgages, you’ll hear stuff about “maturing”. Maturing is one of the worst things that can happen; once they hit a certain “age” you’re going to be on the hook for double digit interest that balloons overnight. If you’re going to go with one of these, talk to us first. We’ll help you understand if you can pay it off before it matures or if you can transition it into a fixed rate at a later date and save money that way.

How Much Time Do You need?

Depending on how much time you need will make the difference in what kind of mortgage you choose. If you want a mortgage that you can repay quickly but don’t mind paying off a bulk payment at the end, a VRM jumbo loan might be the right choice for you. If you’re going to need more time to pay off your mortgage (5-15 years or more) you may want to go with a fixed rate.

Inflation is around the corner and it never hurts to explore your options. If you’re trying to find the mortgage that’s right for you, give us a call. We’ll help you find the option that fits you best!

Is a Junior Lien a Second Mortgage?

second mortgageYou may have heard about junior liens, but what the heck are they? In short they’re the same thing as a second mortgage or a home equity loan – you’re just using the equity you already have in your home to get the money you need to move forward. They’re not the same as a home equity line of credit though (something that should be avoided unless you really need one!), and it’s important to understand the differences. Here we’re going to talk about junior liens, what you can do with them and why you would want one.

What is a Junior Lien?

Second mortgages allow you to use the equity in your home as collateral when you still have another mortgage (your first mortgage) on your home. You can have open ended mortgages, like HELOCs or home equity lines of credit that you borrow and repay again and again, or you can have close ended mortgages that give you a lump sum at the start of the mortgage the one time.

The thing you’ll need to understand about second mortgages is that they cost more – because in the grand scheme of things, your first mortgage will be the most important. You’ll want to talk with one of our Toronto mortgage brokers more about how another mortgage will affect your equity situation in your home.

Your First Mortgage Gets Paid First

You’re going to pay a higher interest rate on a second mortgage because the lender assumes a higher level of risk. Let’s say you default on your mortgage and the lenders are lining up. If your home gets put up on the auction block, your first mortgage lender takes their cut first. If you have to sell your home, the debt with your first mortgage lender gets settled first; unless you can get the first lender to sublimate the loan to the second (switch who gets to be on top), that’s how it will always be. It’s very rare for a lender to sublimate their loan obligation.

Be Careful Consolidating Your Debts

While consolidating high interest debts with the equity in your home can seem like a good idea, it may not be. You’re going to want to lock in a super low interest rate on your home equity loan before you even think about paying off your debts this way.

Working with us as your Canada mortgage broker we’ll help you understand if this is the right move for you – because after all, you’re not really paying off a debt, you’re just shifting it. You interest rates might stay low in the short run, but in the long run you could run into some serious trouble. If you’re not able to repay your home equity loan, you could end up in the position of losing your home. No one wants that, especially us. Give us a call today and see how we can help you find the right solution for your borrowing needs.

Housing Starts Up for May

toronto mortgagesMay showed a drastic rise in requests for housing starts, something that was a bit off the mark when looking at economic forecasts for the last year. Month over month building permits rose by about 5%, following a big jump in April of about 11%; this is the longest stretch of new housing starts seen in 10 years, which is a great thing. Many analysts say that people shouldn’t expect results just yet, as it can take years from getting the permit to start building and have a finished product. So while there may be a serious lag between starts and finishes, presales are beginning to pick up, especially in the condo market.

What are Housing Starts?

Housing starts are successful applications to build homes, condos or residences. They can be defined as small housing complexes or even businesses, but residential housing starts are of significant importance; the more people are able and willing to start construction on a property the better the economic outlook for a particular area is. For the last ten years housing sales have been booming (except for this last year), while new construction has lagged a bit for the last two. Many homes and condos fell into the presale stage but developers abandoned projects, unsure about the economic outlook.

Why Housing Starts Are Important

While it may take some time for new construction to get started and for the real impact to be seen, it’s a good start. The more homes that are entering the building stage now the more homes we’ll have in the future.

A good majority of the homes that have been sold in the last 5 years were built between 1970 and 1990, leaving a large glut of homebuyers searching for something newer in the dust. It’s been shown that newer homes actually save money on maintenance and are cheaper to finance in the long run, and with more and more new homes coming available it’s a big boost to the economy.

More people buying permits are buying materials, hiring labor, generating mortgages and it trickles down throughout the economy.

Numbers Could be Spurred By Pre-Sales From Months Ago

Another flipside to the equation is that these are just presale orders from months ago finally getting started in the building process. It’s not uncommon for builders to wait to get customers and cover their bases before they even start getting their permits. In the case of condos permits are specific to each custom build; with interest rates at all-time lows, more people are investing in condos and the like.

Multifamily dwellings (row houses, apartments, etc.) also saw a boost of 4%. Just looking at residential permits alone had large gains of almost 8%. Again, this doesn’t mean that more homes are being sold, but it could mean that some are and others are beginning to enter into the construction phase. Many Canada mortgage brokers remain optimistic about the numbers, saying that Canadians are still investing in new homes for sale.

Breaking Your Sales Goals for 2013

Everyone wants to break their sales goals year on year, but how are you going to do it? How are you going to move more and more real estate this year? What’s your plan? Here we’re going to talk about how you can double your sales, make that extra $100,000 and have the breakthrough year you’ve always wanted. Anyone can be an imitator, but it takes something special to be an innovator. Don’t get trapped in the office all year round trying to make that one extra bonus commission.

Make a Crazy Goal

The first thing you’re going to want to do is making a crazy goal. Make it over the moon, how much would you like to make at the peak of your career? Take that, add 50% to it! This will be your crazy goal, the one where you could get there if you work hard enough, but if you’re working as a realtor or a mortgage broker you’re going to have to realize that you may not be able to reach this, but it never hurts to start small and dream big right? Again, this is your crazy goal as a mortgage broker or real estate agent – don’t worry if you can’t meet this one, it won’t be the end of the world.

Make a Realistic Goal

Your realistic goal should be, well, realistic! You’re going to want to look at how much you’re making now, how much you’d like to make in the future and meet yourself halfway. This should always, always be less than your crazy goal but be a lot higher that what you’re making now.

If you’re just starting off at zero, the better you might end up at the end of the year (the only place to go from the bottom is up!) Just try and keep it realistic, don’t get sad if you can’t hit your crazy goal this year, and if you’re a little under your realistic goal you’re going to be okay. The point is to start making goals, making milestones, setting places for you to go in your real estate or brokerage career.

Make a Sad Goal You Know You Can Hit but Wouldn’t Want to

Your sad goal needs to be what you made last year. This is the lowest you ever want to go, and honestly you don’t even want to go that low. You want to surpass this milestone by a long shot, even if you don’t reach your realistic or crazy goal. If this is your first year, you have to move past $0.

Smashing sales records is all about setting goals and having a plan. You should now have your realistic, crazy and the lowest goal you need to reach. Sit down and think about changes in strategies, ways you’re going to make yourself stand out to your clients this year. Remember, it’s all about innovation – the best ideas are always rewarded. Start small, dream big, beat those sales goals!