House Buyers To-Do-List before Jan 1st 2018

As our Remembrance Day weekend passes, quality time has been spent with families and community and I now look forward to what’s on the calendar next. What is next you ask? I’ve completed my Stranger Things Season 2 binge so onwards and upwards. The Christmas Season is next of course!… and the looming Jan 1st mortgage rule deadline that will inevitably take up most of our Abbotsford Mortgage Broker Teams December, (I really sucked the fun out of all that Christmas and Binge TV watching stuff)… but we love Mortgages & Christmas so bring it on!

So let’s get a head start on the mortgage stuff with a quick list of things you should prepare and avoid mistakes that can potentially cause a mortgage turns down from lenders at crunch time.

It appears the next round of rule changes, set for Jan 1st, are not as publicly talked about as the previous rule changes that were implemented last year. In fact I’m getting a lot less calls regarding it than I expected.

Last year our phones were flooded with first time buyer inquiries regarding how the changes would impact them and what they could do to prepare. It would seem the repeat buyers with larger down payments are Rodeo Experts now and have other things to worry about. Anyone else just realize we have 5 weekends to get our shopping done? So I understand.
So before the flurry of shopping for houses and shopping for Christmas all hits at once, you should quickly request these items to be prepared:

IMPORTANT: This list will help you obtain a signed mortgage approval before January 1, 2018 and be exempt from the new mortgage rule while qualifying under the current lending guidelines.

  • Ask for a job letter from your employer
  • Know where to get a copy of your paystub
  • Ask your accountant for PDF copies ahead of time: T1 Generals for 2015 and 2016. They may be taking holidays come December
  • Have your accountant provide you your most recent NOA
  • Get a mortgage Print out for your current mortgage
  • Get a rate hold from us and sign the pre-approval

After Jan 1st 2018 every buyer in town can expect

  • A reduced mortgage approval, reducing the potential purchase price for a new home. On average this will bring down buying power by approximately 14%-20%
  • With a 50% down-payment and a secured 5 year fixed rate at 3.19%, buyers would have to qualify on a rate of 5.19% (3.19% + 2% = 5.19%) OR the benchmark rate of 4.99%. Which ever is higher.
  • Buying Power Before January 1, 2018 Example: Household income: $120,000 per year, Down-payment of up to $180,000 (at least 20% down) =MAX PURCHASE PRICE $900K
  • Buying Power After January 1, 2018 Example: Household income: $120,000 per year, Down-payment of up to $180,000 (at least 20% down) =MAX PURCHASE PRICE $800k

Call us if you want to ear mark an approval or just ask a question and let’s see if it is the right time to buy or sell. The easy, hassle-free answer to your mortgage questions.

By Referral Mortgage Consultants*

“Click, Call, Chat – Award Winning Brokers”

Dave B 604 897 2741 Jordi 604 615 1312 www.AbbotsfordsMortgageBroker.com

www.ChilliwackMortgageBroker.com

 www.BRMC.ca

 www.PeaceOfficeMortgageBroker.com

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1 New Mortgage Rule Change to Watch in 2017

As we head into the fall market and after 1 year since the last mortgage rule changes, OFSI (the governing body in Canada for financial services) are proposing yet another mortgage rule change that may impact your home buying/purchasing limits.  OFSI has proposed changes to the Guideline B-20 Residential Mortgage Underwriting Practices and Procedures (referred to as B-20 – http://www.osfi-bsif.gc.ca/Eng/fi-if/in-ai/Pages/rfmrm.aspx).  The most concerning change would be imposing a 200 basis point qualifying stress test for all uninsured mortgages.

What does this mean for the buyer?  Even a 50% downpayment, would be required to qualify for the mortgage based on a rate 2% higher than the actual mortgage rate you would be obtaining.  So, if the actual rate you were obtaining today were let’s say 2.99%, you would have to qualify for the mortgage based on a rate of 4.99%( 2.99% + 2% for qualifying rule = 4.99%)

This higher qualifying rate would essentially reduce the amount of mortgage that could be obtained  hence reduce the eligible purchase price for a new home.  On average, this would reduce  buying power by approximately 14%.

Here is an example of the reduction in buying power:

-Clients are selling home and buying a new one -Household Income: $120,000 per year -Down payment: Up to $180,000 (they want to put at least 20% down)  $120K Annual Income/20% down

 Today:    2.99%, 30 year amortization.     Max Purchase Price $900K     Down payment $180K     Max mortgage $720K

 Proposed:    4.99%, 30 year amortization     Max Purchase Price $800k     Down Payment $180K     Max Mortgage $620K

While this is still in the proposal stage, we anticipate this coming into effect mid to end of October 2017.  The good news is, buyers can prepare for these changes ahead of time. The most effective way is by obtaining a pre-approval now that secures the rate for up to 120 days. Although It is not certain that lenders would be able to honor the approval based on how OSFI rolls out the proposed changes, it is still one of the best ways to be proactive.  Let us review your options now and create an optimum mortgage plan. Contact us today for your free home financing advice.

                                            

By Referral Mortgage Consultants*

“Click, Call, Chat – Award Winning Brokers”
Dave  604 897 2741 Jordi 604 615 1312
www.AbbotsfordsMortgageBroker.com

www.ChilliwackMortgageBroker.com

www.BRMC.ca

www.PeaceOfficeMortgageBroker.com

Connect with us on!
BRMC Facebook

BRMC Google review Chilliwack Office

BRMC Google review Abbotsford Office

BRMC Google review Mission Office

http://www.linkedin.com/company/2410358

https://twitter.com/brmcmortgages

http://www.youtube.com/user/BRMCmortgages

We’re active on Facebook, Twitter, LinkedIn & YouTube. We really appreciate reviews! Good or Bad please let the world hear your voice! Connect with us for ongoing industry news items, contests & prizes.

*By Referral Mortgage Consultants – doing business as BRMC is: Verico Preferred Financing Inc / Verico Canadian 1st Mortgage Corp which have a co-brokering agreement and there is a common Mortgage relationship and are licensed with the Verico Dreyer Group. Mortgage ownership, that employees of both Mortgage companies may review, advise and help process the Mortgage files. That Verico Preferred Financing Inc & Verico Canadian 1st Mortgage Corp share the some expense and income from mortgages. Kim Langille Featured on thess site is an unlicensed mortgage assistant only, not a Mortgage Consultant. Jordi Browne featured on this site is the Mortgage Broker of record. “The Broker” is Jordi Browne. Jordi Browne also holds a Life Insurance License and represents Verico Canadian 1st Mortgage Corp. Dave Browne featured on this site has a Life Insurance License too but is an independent agent– Jordi and Dave Browne co-broker life insurance files and share expenses, all income retained by Verico Canadian 1st Mortgage Corp.

Higher Down Payments for Home Buyers Tomorrow!

Abbotsford, Chilliwack and Mission: A stolen gift from the Federal Grinch or a measured stance against an over heated real estate market?

According to Richard Madan from CTV news, Abbotsford, Chilliwack and Mission mortgages will see the Federal Government change their minimum down payment in 2016.

Tomorrow on Friday December 11th 2015  they are announcing that minimum down payments are being increased depending on the house purchase price. This will ultimately require buyers to save up more money to buy a home.

The new regulation will be require buyers to put 10% down payment on any amount of purchase price beyond $500,000.00. See the comparison chart below.

The regulation are expected to take effect in 2016.

Buyer shopping for homes below $500,000.00 will not be affected.

Our finance minister Bill Morneau will announce tomorrow morning. These measures are taken to cool the heated Real Estate market locally and in Ontario.

Purchase Price Current Down Payment Addition Down Payment New Down Payment
$400,000.00 $20,000.00 $0.00 $20,000.00
$500,000.00 $25,000.00 $0.00 $25,000.00
$600,000.00 $30,000.00 $5,000.00 $35,000.00
$700,000.00 $35,000.00 $10,000.00 $45,000.00
$800,000.00 $40,000.00 $15,000.00 $55,000.00
$900,000.00 $45,000.00 $20,000.00 $65,000.00

SOURCE:http://www.ctvnews.ca/mobile/business/feds-to-tighten-mortgage-rules-for-homes-over-500k-1.2695989

Abbotsford, Chilliwack, Mission New Down Payment Rules

By Referral Mortgage Consultants*

“Click, Call, Chat – Award Winning Brokers”
 1 – 32540 Logan Ave
Mission BCV2V 6G3

&

360-3033 Immel St

AbbotsfordBCV2S 6S2

&

8387 Young Rd

ChilliwackBCV2P 4N8

Dave  604 897 2741 Jordi 604 615 1312
www.AbbotsfordsMortgageBroker.com

 

www.BRMC.ca

 

www.PeaceOfficeMortgageBroker.com

Connect with us on!
 BRMC Facebook

 

BRMC Google review Chilliwack Office

BRMC Google review Abbotsford Office

BRMC Google review Mission Office 

http://www.linkedin.com/company/2410358

https://twitter.com/brmcmortgages

http://www.youtube.com/user/BRMCmortgages

Discounted rates are resulting in Huge Marked-Up penalties and how to avoid them.

I want to be clear on this…..marked-up penalty calculation are not done by all the lenders….but unfortunately the big 5 banks in Canada are applying this calculations to their mortgages. Mortgages are no longer just about the lowest rate, rather ensuring the product you take will not hurt you in the long run. As a professional mortgage broker serving Abbotsford, Chilliwack and Mission BC, we help you understand these little differences from lender to lender.

When I started in this industry 15+ years ago mortgage penalties for breaking the term of a mortgage consisted of 3 months interest. Then interest rates started to drop and the Standard IRD Penalty Calculation started creeping into the world of mortgages.

What is interest rate differential (IRD)? Here is how one lender puts it.

“Interest Rate Differential (IRD) is calculated by applying the difference between the interest you are being charged on your mortgage and the current discounted rate at the time of payout that is closest to the remaining term on your mortgage.

This rate difference between the two amounts is then applied to the outstanding principal balance of you Mortgage for the remaining term of the mortgage.”

To put this in simpler terms.

If you have 3 years left on your 5 year term the bank will charge you the difference between the rate you have on your mortgage and the going rate for the 3 year term.  They will take that difference and apply it in form of “loss of interest earned” by the bank to the remaining 3 years and come up with the penalty amount.

THAT IS NOT EVEN THE SNEAKY SCAM YOU SHOULD AVOID.

When this started happening penalties were higher but not as high as they are now. The reason is the banks had not yet figured out how to take discounting and use it to their advantage. Well next came Discounted Rate IRD Penalty Calculation.

Discounting is a maneuver now done by banks to give the appearance that they are offering you a deal off their “posted rates”. It makes you feel like you negotiated a rate lower than the advertised rate they introduced up front. On the surface all is good. Nobody pays sticker price at a car dealerships and clients loved negotiating deeper discounts on their mortgages too. Keep in mind this is now to the delight of the Big Banks armed with their new Discounted Rate IRD Penalty Calculations.

In the past, before Discounted Rate IRD Penalty Calculation, it looked like this. The banks gave a similar discount off all of their posted rates across the board.

Term Posted Rate Discount Discounted Rate
3 years 4.69% 1.90% 2.79%
4 years 4.89% 1.90% 2.99%
5 years 4.99% 1.90% 3.09%

Here is an example of what penalties used to look like on these old discounted mortgages. In this case I am going to use an example of a mortgage balance of $300,000, and 3 years remaining on your term with the assumption rates did not change over the previous 2 years.

Calculation for IRD would look as follows.

3.09% – Rate on your mortgage

– 2.79% – 3 year posted rate less discount given on 5 year term (4.69% – 1.90% = 2.79%)

Standard IRD Penalty Difference = 0.30%

You would be charged the 0.30% for the remaining 3 years left on the mortgage which comes to $2600.

What the Banks did next was so simple yet increased their bottom line by enormous amounts.  All they did was change the discounts on the terms less then 5 years.

This is a rate sheet I pulled from one of the big 5 banks today.  I have highlighted the differences and how much extra penalty they will charge from the exact same mortgage about

Term Posted Rate Discount Discounted Rate
3 years 3.39% 1.00% 2.39%
4 years 3.89% 1.40% 2.49%
5 years 4.49% 1.80% 2.64%

You will see the discounted rate is very similar but the posted rates and discounts have changed.

The same penalty on the same $300,000 mortgage now looks like this.

2.64% – Rate on your mortgage

-1.59% – 3 year posted rate less discount given on 5 year term (3.39% – 1.80% = 1.59%)

Discounted Rate IRD Penalty Difference = 1.04%!

Now instead of being charged a penalty of $2,600 you would be charged $9,055 all because the bank changed the posted rates and discounts they give you. A vast majority of clients are given the discounted rates so why do we even have posted rates?

This example above is not even that bad as I have seen penalties in the $30,000 + range.

These are the details you will never get unless you go through a mortgage expert. Shop your mortgage, don’t just shop your rate!

Jordi Browne Mortgage & Insurance Team

8387 Young Rd
Chilliwack, BC V2P4N8

604 615 1312
604 795 2933
604 795 2770

www.AbbotsfordsMortgageBroker.com 

By Referral Mortgage Consultants*

“Click, Call, Chat – Award Winning Brokers”
1 – 32540 Logan Ave
Mission BCV2V 6G3

&

360-3033 Immel St

AbbotsfordBCV2S 6S2

&

8387 Young Rd

ChilliwackBCV2P 4N8

Dave  604 897 2741 Jordi 604 615 1312
www.AbbotsfordsMortgageBroker.com

 

www.BRMC.ca

 

www.PeaceOfficeMortgageBroker.com

Connect with us on!
BRMC Facebook

 

BRMC Google review Chilliwack Office

BRMC Google review Abbotsford Office

BRMC Google review Mission Office

http://www.linkedin.com/company/2410358

https://twitter.com/brmcmortgages

http://www.youtube.com/user/BRMCmortgages

We’re active on Facebook, Twitter, LinkedIn & YouTube. We really appreciate reviews! Good or Bad please let the world hear your voice! Connect with us for ongoing industry news items, contests & prizes.

*By Referral Mortgage Consultants – doing business as BRMC is: Verico Preferred Financing Inc / Verico Canadian 1st Mortgage Corp which have a co-brokering agreement and there is a common Mortgage relationship and are licensed with the Verico Dreyer Group. Mortgage ownership, that employees of both Mortgage companies may review, advise and help process the Mortgage files. That Verico Preferred Financing Inc & Verico Canadian 1st Mortgage Corp share the some expense and income from mortgages. Kim Langille Featured on thess site is an unlicensed mortgage assistant only, not a Mortgage Consultant. Jordi Browne featured on this site is the Mortgage Broker of record. “The Broker” is Jordi Browne. Jordi Browne also holds a Life Insurance License and represents Verico Canadian 1st Mortgage Corp. Dave Browne featured on this site has a Life Insurance License too but is an independent agent– Jordi and Dave Browne co-broker life insurance files and share expenses, all income retained by Verico Canadian 1st Mortgage Corp.