2 Apr

Why You Should Monitor Your Credit Report Once You’re on ANY Debt Deferral Program

Credit

Posted by: Garth Chapman

Why You Should Monitor Your Credit Report and Score Once You are on a Mortgage or any other Debt Payment Deferral Program

  • The banks all have automated systems that report on your Credit Bureau that you did or did not make a payment as agreed. When the payment is controlled by a Pre-authorized Debit the bank’s system knows when the payment is due and debits your account.
  • When a payment request is rejected, usually due to insufficient funds or a cancellation made by you, the bank’s systems then automatically notifies the Credit Reporting Bureaus (Equifax and TransUnion) of the late payment.
  • When the bank grants you a payment deferral they re-set your next payment due date for the date that you are to re-start making payments. So if you started a 6-month deferral on April 1 the bank re-sets your next payment due date to October 1.
  • With these deferral programs being a brand new process and the banks scrambling to do this in a very short timeline, it is possible a few mortgage payments may end up not being re-set to the deferred date. This will be unusual, but it is possible. Those who made the deferral agreement with their bank just a very few days before of their next payment might be more at risk of that happening.  Again, it will be very rare.
  • Check your credit reports weekly for the next 5-6 weeks to ensure there are no errors on your credit report related to any mortgage or other payment deferrals.
  • If you find there is an incorrect reporting of a late or missed payment, write immediately to your Bank and strongly request that they immediately correct their reporting to all Credit Bureaus that they report to, and also have them write you a letter confirming that the reporting was incorrect. Make sure they refer in the letter to exactly what was incorrectly reported, when, and any other relevant details.
  • So with that in mind, now is a great time to begin the process of monitoring your credit report and credit score. See below what that looks like – it is very easy, free, and completely automatic.

How to Automate the Monitoring of Your Credit – and How to Check it Manually

Login to your bank account and activate their free credit monitoring.  All the big-6 banks have these services. For example, at Scotiabank it is called InfoAlerts.

We also have these two free services monitoring our credit.

  • Credit Karma https://www.creditkarma.ca/
    • Free to use.
    • Provides alerts by email.
    • Does not create a ‘hard pull’ on your credit (no impact on credit score).
    • Is a good source for your detailed TransUnion credit report. 
    • The credit score you see is not the Beacon Score that Banks and Mortgage Brokers see, but it is close enough to tell you how lenders will view your credit in general terms.
    • You can login anytime to review your full credit report, and you can drill down to the details of each item on your credit report.
  • Borrowell https://app.borrowell.com/#/public/login
    • Free to use.
    • Does not create a ‘hard pull’ on your credit (no impact on credit score).
    • Is a good source for your detailed Equifax credit report.
    • The credit score you see is not the Beacon Score that Banks and Mortgage Brokers see, but it is close enough to tell you how lenders will view your credit in general terms.
    • You can login anytime to review your full credit report, and you can drill down to the details of each item on your credit report. 
2 Apr

How to Automate the Monitoring of Your Credit

Credit

Posted by: Garth Chapman

How to Automate the Monitoring of Your Credit and How to Manually Check the Detailed Report

Login to your bank account and activate their free credit monitoring.  All the big-6 banks have these services. At Scotiabank it is call InfoAlerts.

I also have these two free services monitoring my credit.

  • Credit Karma https://www.creditkarma.ca/
    • Free to use.
    • Provides alerts by email.
    • Does not create a ‘hard pull’ on your credit (no impact on credit score).
    • Is a good source for your detailed TransUnion credit report. 
    • You can login anytime to review your full credit report, and you can drill down to the details of each item on your credit report.
    • The credit score you see is not the Beacon Score that Banks and Mortgage Brokers see, but it is close enough to tell you how lenders will view your credit in general terms.
  • Borrowell https://app.borrowell.com/#/public/login
    • Free to use.
    • Does not create a ‘hard pull’ on your credit (no impact on credit score).
    • Is a good source for your detailed Equifax credit report.
    • You can login anytime to review your full credit report, and you can drill down to the details of each item on your credit report.
    • The credit score you see is not the Beacon Score that Banks and Mortgage Brokers see, but it is close enough to tell you how lenders will view your credit in general terms.

Why You Should Monitor Your Credit Bureau and Score once on a Debt Deferral Program

  • The banks all have automated systems that report on your Credit Bureau that you did or did not make a payment as agreed.
  • When the payment is controlled by a Pre-authorized Debit the bank’s system knows when the payment is due and debits your account.
  • When a payment request is rejected, usually due to insufficient funds or a cancellation made by you, the bank’s systems then automatically notifies the Credit Reporting Bureaus (Equifax and TransUnion) of the late payment.
  • When the bank grants you a payment deferral they re-set your next payment due date for the date that you are to re-start making payments. So if you started a 6-month deferral on April 1 the bank re-sets your next payment due date to October 1.
  • With these deferral programs being a brand new process and the banks scrambling to do this in a very short timeline, it is possible a few mortgage payments may end up not being re-set to the deferred date. This will be unusual, but it is possible. Those who made the deferral agreement with their bank just a very few days before of their next payment might be more at risk of that happening.  Again, it will be very rare.
  • So with that in mind, now is a great time to begin the process of monitoring your credit report and credit score. See below what that looks like – it is very easy, free, and completely automatic.
2 Apr

What is the Cost of a 6-month mortgage payment deferral?

Challenging Times

Posted by: Garth Chapman

What is the Cost of a 6-month mortgage payment deferral?

We will assume the deferral occurs in the first 6 months of the new mortgage, which is unlikely to happen but provides the most expensive case scenario. We will use the method used by most Credit Unions, and by TD Bank and others, whereby the bank will re-set you payment at the end of your current term, to have you pay back the accrued interest over the remaining entire amortization of the mortgage.  This keeps the amortization period unchanged from its original  length. This method is the most generous for your cash-flow, and is also the most expensive possible method.

  • A $100,000 mortgage at 3.00% interest with a 25 year amortization would have a monthly payment of $473.25. We will assume it is on a 5-year term.
  • If a client defers a $100,000 mortgage at 3% interest for 6 months you would accrue $1,500.00 in interest.  The interest each month for those 6 months is on a static balance rather than on a declining balance, so this amount is slightly higher than the $1,490.70 in interest you would pay if the payments were not deferred.
  • Once the 5-year term ends, and the mortgage renews the balance owing is higher by the accrued interest, plus interest on that accrued interest, plus the principal not paid and the interest on the principal not paid. All of that adds up to $3,266.87. You would have not made 6 payments totaling $2,839.50.
  • So upon renewal the balance owing would be $88,741.17 instead of the $85,474.30 it would have been without a deferral.
  • Therefore the total cost of the deferral at the end of the 5-year term would be $427.37.  So the total cost of a 6-month deferral after 5 years is equal to 90% of one monthly payment.
  • This assumes you pay all of that deferred money back on your mortgage at the end of that term. If you don’t then the cost will increase over time. Let’s look at that next.
  • Assuming the new interest rate at renewal was unchanged at 3.00%, and renewing with a 20-year amortization, your new monthly payment would be $491.33 instead of $473.24, a difference of $18.09 per month.
  • If you renewed again and again at the same interest rate until the mortgage was paid off you would have paid a total of $45,059.69 instead of $41,972.92, for a total cost of $3,086.77

TAKEAWAYS AND SUGGESTIONS:

  • Taking a payment deferral on any debt is a defensive and protective move taken at a time of great uncertainty. You may need that money during this challenging economic time or you may not, but you won’t have it if you don’t take the deferrals available to you. And you likely don’t currently know if you will need it or not. If you know you will not need it, then why take it.

What We are Doing:

  • We are being defensive and are protecting our financial position and our liquidity by taking deferrals on all 9 of our mortgages.
  • We are depositing the entire amounts of the deferred payments each month into a separate account. We will use only of that money what we must.
  • When this is over we will use the remaining money to pay down debt.  We might decide to use it to pay down our HELOCS instead of our mortgages because the HELOCS have higher interest rates than the mortgages.
  • That might not be the case for others, but we have very low fixed rate mortgages. And doing so will have the greatest impact in reducing our monthly payments.

Some Considerations for You:

  • If you take a 6-month deferral and you put that money into a separate bank account and spend of it only what you must, and then when the dust settles you pay what is left in that account directly on that mortgage you will reduce the long-term cost of the deferral.
  • Or, if when the dust settles you decide it is more important to reduce your overall monthly debt payments by the highest possible amount, then take that remaining money and pay down the debt that would reduce your monthly payments by the largest amount, or the debt with the highest interest rate.
  • It’s your money. Use it in the way that best serves you.

The following information is taken from a Money Coaches Canada article

Should I Defer my Mortgage Payments?

According to Vancouver based mortgage broker Marci Dean, each lender has created a policy around the deferral program. In some cases, the lenders default to a 6-month deferral and it’s up to the borrower to call/email to stop the deferral. For other lenders, it is month to month. In that case, borrowers will login or email their request to skip payment the following month.

Again, depending on the lender, interest will either be added to payments after the deferral or it will be added to the mortgage balance at the end of the term which will result in larger payments later.

Here are a few examples from bank lenders:

TD: Payments will be adjusted automatically at the start of your next term or, if you change anything else before renewal, at that time, to ensure your mortgage is paid off at the end of your original amortization period.

Scotiabank: A mortgage payment deferral means that payments are skipped for up to 6 months, during which interest is accrued to the outstanding balance of the mortgage. The amount is incorporated into the monthly payment when mortgage payments resume at the end of the deferral period.

CIBC: The interest that accrues during the deferral period will be added to the principal balance of your mortgage to provide you with immediate payment relief while experiencing temporary hardships. As a result, once payments resume, you will continue to pay interest on the principal, and your payments may increase after the deferral period.


I hope this information helps you in your decision-making and actions on your mortgage(s).  Do not hesitate to call or email me for further advice.

30 Mar

Payment Deferrals on your Mortgage & Other Loans – What You Need to Know

Mortgage Help

Posted by: Garth Chapman

The Federal Government announced on March 18, 2020 that it would provide increased flexibility to lenders to defer mortgage payments. Then the big-6 banks announced they would be allowing up to 6 months of mortgage payment deferrals to assist those impacted by COVID-19.  The Monoline lenders followed suit.  Since then they have all been doing as best they can to accommodate the massive volume of calls and emails, while implementing new processes and procedures almost daily to help handle these inquiries.  Lenders are updating us daily/hourly as to what the best course of actions is, and I encourage you to contact your Mortgage Advisor for current advice.


Essential ServicesBankers, Mortgage Brokerages, Realtors and other Financial service providers have been declared essential services in Alberta. So we’re not going anywhere and will continue to be there to help you through this.


Banks are offering COVID-19 Relief on Auto & Personal Loans, Credit Cards, Credit Lines

Student Loans can be also be deferred. They are either Federal or Provincial, so check those programs.

Important note – a payment deferral is not a forgiveness of the amount owed.  It means the payments are deferred to a later time, when we will have to pay them back, with a cost of interest charges on the interest deferred (aka interest on interest).

Credit Union customers – access to a variety of programs and solutions designed to ease difficulties with loan payments and short-term cash flow. Check with your Credit Union.


Here is what we have learned so far:

  • Banks are prioritizing clients based on need and next mortgage payment date.
  • Regardless of how urgent your situation is, it is going to take time to get a response. It can be frustrating to wait on hold, or wait for an email response, but please contact them before you miss a payment, as to not damage your credit.
  • NEVER EVER be late for or miss a mortgage payment.  Do whatever you have to do.  Pay with your credit card.  Borrow from family.  Anything.
  • Effectively the deferred interest is capitalized (added) into the mortgage balance owing.
  • I have heard from clients who have received 6 months of deferred payments with no questions asked.  In fact I am one of those lucky borrowers.
  • Understand this is not always the case.  You may be asked about your employment status and other reasons you have for requesting deferral. Some lenders will ask about your net worth status and liquid assets available. (If you do your regular banking with the same lender that holds your mortgage, they can likely assess this internally).
  • Things like whether or not your mortgage is default insured aka (CMHC), collaterally charged (has a HELOC on it), the loan-to-value ratio, and if you have been set up on accelerated payments or applied any lump sum payments in the past will be considered.
  • Each lender has their own criteria for deciding what criteria they will use in making mortgage deferral decisions.  In my own experience with three lenders so far, and based on many of my clients experiences, the consensus so far seems to be that often the best results are received when speaking directly with a bank representative.  Not always, but most often. So in my opinion it is best to be willing to be on hold for an hour and maybe more, to achieve your desired outcome.
  • Note- if you are a denied a deferral, try again via the same method or the other methods your lender offers (phone, website application or email).  There is still not full consistency within each lender on what is granted and what is denied from day to day and person to person.
  • Some clients are offered a 1-month or a 3-month deferral only and encouraged to re-apply with new status going forward. * PS to Alberta residents * We have had clients in the oil and gas industry report they were asked by the lenders if their layoff was directly due to COVID-19, or other factors. GREAT QUESTION.  I believe the answer may be related to the apparent other challenges within the O&G industry and some lenders being sensitive to this as an area of risk to address.
  • Mortgage distress, like any kind of distress, is relative.  For some people, mortgage distress is due to worry about the coming disastrous economic effects of COVID-19 on their job or business.  For other people, mortgage distress is being suddenly laid off with no income and unable to pay their Mortgage on Tuesday.  All are valid concerns, however, some lenders are prioritizing and only dealing with those not able to pay their mortgage payment due within the next few days.  If you don’t have concern about missing your next payment, consider sending an email or filling out a form for a call back later.  I know waiting can be frustrating.  In these times, exercising a little patience and freeing up the phone lines could help your friends and neighbours keep their home.
  • If you believe you have some equity in your home, you might be able to avoid all of this by speaking to your Mortgage Broker and setting yourself up to access equity for an affordable fallback.  You should do this before there are any negative changes to your income or home value.  I would suggest NOW is the time.  You may be able to refinance to draw out an emergency fund, set up a home equity credit line, a reverse mortgage, or even private financing to bridge the gap at this time.
  • Self employed and commissioned workers: Some lenders will require “proof” that you’ve been laid off or your income has been impacted by COVID-19 in order to defer payments.  For many of you, that is something that you won’t be able to document for months. I encourage you to speak with your Mortgage Broker NOW to explore your financing options outside of or in addition to deferred mortgage payments.
  • Questions to ask your bank when you speak with them about a deferral:
    • Ask your bank about the details of what their bank is offering.
    • Does the deferred pay-down get added into the payments to keep the amortization the same, or is the amortization lengthened to fit?
    • Some banks cap the deferred interest within the remaining term, some within the amortization. If within term then the lower the term the higher the new payment will be after the 6 months is up will be. If within the Amortization then generally the impact is less as the timeline is longer.

See the CMHC webpage on mortgage deferrals here

COVID-19: Understanding Mortgage Payment Deferral


What are the costs to you of a 6-month Mortgage Payment Deferral?

Read my Blog Post on that here


Why You Should Monitor Your Credit Report and Score Once You are on a Mortgage or any other Debt Payment Deferral Program

Read my Blog Post on that here


Here is an article by Money Coaches Canada

Should I Defer my Mortgage Payments?


I hope this information helps you in your decision-making and actions on your mortgage(s).  Do not hesitate to call or email me for further advice.

** And my sincere thanks to my good friend and Jencor Mortgage Advisor Sarah Boudreau for the original idea for this post and for some of the content of this post.**

30 Mar

Mortgage Payment Deferrals: What to do, Who & How to Contact

Mortgage Help

Posted by: Garth Chapman

Many of our clients, their family and friends are looking for information and so we hope you find the following to be helpful.

If you have any questions about the following your Jencor Advisor is available and we will do our best to answer questions, find answers and anything else we can do for you.

Each lender has a separate telephone number and or email address for clients to use to make contact and obtain information regarding payment deferral, skip a payment, miss a payment options.

Please prepare yourself prior to your call or email with the following information:

At this time, due to high call volumes you may want to e-mail your lender, though I personally prefer to speak with a real live human. 

  • Be prepared for the possibility of questions on any loss of income you are experiencing or are about to experience.
  • Have your Mortgage statement handy as it contains your account number and other pertinent information.
  • You may be asked about your current assets and income as well all expenses.

Banks’ Customer Service phone numbers to call if and when you want to explore their mortgage relief programs.

• ATB Financial 1-800-332-8383

• B2B Bank 1-866-684-5637

• BMO 1-877-895-3278

• Bridgewater Bank 1-866-243-4301

• CIBC 1-800-465-2422

• CIBC FirstLine – 1.877.454.9030

• Canadiana 1-877-315-1633

• CFF Bank 1-855-767-3031

• Chinook Financial 403-934-3358

• CMLS Financial 1-888-995-2657

• Connect First 403-736-4000

• Equitable Bank 1-888-334-3313

• First National Financial 1-888-488-0794

• First Calgary Financial CU 403-736-4000

• Haventree Bank 1-855-272-0051

• HSBC 1-888-310-4722

• Home Trust 1-855-270-3630

• HomEquity Bank 1-866-522-2447

• ICICI 1-888-424-2422

• Lendwise 1-866-675-7022

• Manulife 1-855-518-7546

• Marathon Mortgage Corp 1-855-503-6060

• MCAP 1-800-265-2624

• Merix 1-877-637-4911

• National Bank 1-800-361-9522

• Optimum Mortgage 1-866-441-3775

• PC Financial 1-888-723-8881

• Scotiabank 1-866-472-6842

• Servus 1-877-378-8728

• RFA (formerly Street Capital 1-877-416-7873

• Radius Financial 1-866-550-8227

• RMG 1-866-809-5800

• RBC Royal Bank of Canada 1-866-809-5800

• TD Canada Trust 1-866-222-3456

• Tangerine 1-888-826-4374

Lenders with online application options

B2B Bank 1.866.684.5637 / b2bbank.com/COVID19
Bridgewater Bank – 1.866.243.4301 / Outside of Canada 403.817.7000 / customer.experience@bridgewaterbank.ca
CMLS – 1.888.995.2657 / service@cmls.ca
Equitable Bank – 1.866.407.5859 / customerservice@eqbank.com
First National Financial –  1.888.488.0794 / accounts@firstnational.ca (include name/ mortgage  number / property address and question)
Home Trust – 1.855.270.3630 / 416.777.5820 / homehelps@trust.ca
ICICI  Bank– 1.888.424.2422 / Customercare.ca@icicibank.com
Merix / Lendwise – 1.877.637.49111 / customerservice@merixfinancial.com
Manulife – 1.855.518.7546 / banksales@manulife.com
MCAP – 1.800.265.2624 / MYMCAP Portal
Optimum/CW Bank – 1.866.441.3775 / customer.service@cwbank.com
RMG Mortgages – 1.866.809.5800 / mortgagesupport@rmgmortgages.ca

Scotiabank 1.800.472.6842 https://www.scotiabank.com/ca/en/personal/scotia-support/latest-updates/scotia-support/mortgage-payment-relief.html

TD Canada Trust- 1.866.222.3456 – https://www.td.com/ca/en/personal-banking/covid-19/?fbclid=IwAR1sNUkd8KUISgsRgVtREgfQLaBXj6d-DhXJvOm8r2lAe6JsnUEnO8IpcVQ

Our Personal Experiences and those of some clients:

TD Bank: 

We personally got 6-month payment deferrals on 6 TD mortgages, 2 of which are Flexline re-advanceable mortgages (those have HELOCS attached to them, similar to Scotia Step re-advanceable mortgages).

The bank person was on loan from the branch support dept to their mortgage deferral program. She was fantastic and we told her so. From all the calls she is losing her voice but soldiering on in a very helpful and cheery way.

No questions were asked about qualifying us as to why we needed this.

They are not deferring the interest costs on HELOCS, as one should expect. And even though we have lots of access to capital from those HELOCS there was no suggestion at all about our ability to access those HELOCS to fund our mortgage payments.

The interest deferred is capitalized to the mortgage balance owing, and at the end of the current term they will, upon renewal, re-set the payments to allow for the repayment of that deferred interest and deferred mortgage pay-down over the entire remaining amortization.

This is the most generous way a bank could do this. And, we will have the option of paying off any or all of the deferred amounts to reduce the balance and therefore the payments on the new term.

Scotiabank: 

Non-primary residences, including rentals, vacation/cottage properties, are now eligible for the 6-month mortgage payment deferral program (to a maximum of three non-primary properties per borrower). I have advised clients with more than 3 Scotia mortgages to push back, the argument being that since Scotia originally provided you with ‘x’ number of mortgages, and since Scotia has renewed those mortgages over the intervening years, they have an obligation to offer deferrals on all your Scotia mortgages.  Other banks are not limiting the number of mortgages they will allow payment deferrals on.

First Calgary Financial (Credit Union):

We personally got a 3-month payment deferral on one of our rentals properties.

No questions were asked about qualifying us as to why we needed this – their deferrals are granted without question.

The interest deferred is capitalized to the mortgage balance owing, and at the end of the current term they will, upon renewal, re-set the payments to allow for the repayment of that deferred interest and deferred mortgage pay-down over the entire remaining amortization.

This is the most generous way a bank could do this. And, we will have the option of paying off any or all of the deferred amounts to reduce the balance and therefore the payments on the new term

Royal Bank of Canada: 

RBC commercial mortgages will implement interest only payments for six months. No questions asked. You cannot do it for fewer than 6 months. The principle payment is tacked on to the end of your amortization.


The following information is taken from a Money Coaches Canada article

Should I Defer my Mortgage Payments?

According to Vancouver based mortgage broker Marci Dean, each lender has created a policy around the deferral program. In some cases, the lenders default to a 6-month deferral and it’s up to the borrower to call/email to stop the deferral. For other lenders, it is month to month. In that case, borrowers will login or email their request to skip payment the following month.

Again, depending on the lender, interest will either be added to payments after the deferral or it will be added to the mortgage balance at the end of the term which will result in larger payments later.

Here are a few examples from bank lenders:

TD: Payments will be adjusted automatically at the start of your next term or, if you change anything else before renewal, at that time, to ensure your mortgage is paid off at the end of your original amortization period.

Scotiabank: A mortgage payment deferral means that payments are skipped for up to 6 months, during which interest is accrued to the outstanding balance of the mortgage. The amount is incorporated into the monthly payment when mortgage payments resume at the end of the deferral period.

CIBC: The interest that accrues during the deferral period will be added to the principal balance of your mortgage to provide you with immediate payment relief while experiencing temporary hardships. As a result, once payments resume, you will continue to pay interest on the principal, and your payments may increase after the deferral period.

13 Feb

Big-6 Banks’ prepayment penalty charges give reason to consider fair-penalty mortgage lenders

Mortgage Facts & Stats

Posted by: Garth Chapman

From a recent Robert McLister article in the Globe And Mail. 

Committing to a mortgage for five long years exposes people to the most insidious aspect of residential financing: prepayment charges.

And when it comes to such charges – the penalties you pay come when you back out of your mortgage early – some lenders take a greater toll on your bank balance than others.

Big banks are usually the worst. Mortgage finance companies are often the best.

And these bank competitors want you to know it. More and more, smaller lenders are using their preferential penalty calculations as a selling point, as well they should.

This year I’ve seen lenders such as Equitable Bank, Manulife Bank of Canada, XMC Mortgage Corp., Merix Financial, CMLS Financial Ltd., RFA Mortgage Corp., First National Financial LP, and MCAP all go out of their way to step up marketing and educate consumers on how bad penalties from major banks can be. (Mind you, a few of these lenders also have “no-frills” mortgages with high penalties – for example, 3 per cent of principal. So watch out for those.)

Read more here

13 Feb

Insured…Insurable…Uninsurable

Mortgage Facts & Stats

Posted by: Garth Chapman

Once upon a time we had high ratio vs. conventional mortgages, now they are Insured, Insurable or Uninsurable.

How it Was Then

High ratio mortgage – down payment less than 20%, insurance (aka CMHC insurance) paid by the borrower.

Conventional mortgage – down payment of 20% or more, the lender had a choice whether to insure the mortgage or not at their own expense.

How it is Now

Insured –a mortgage transaction where the insurance premium is or has been paid by the client.  Generally, a down-payment below 20%.

Insurable –a mortgage transaction that is portfolio-insured at the lender’s expense for a property valued at less than $1MM that fits insurer rules (qualified at the Bank of Canada benchmark rate over 25 years with a down payment of at least 20%).

Uninsurable – a mortgage that is ineligible for insurance. Examples of Uninsurable are refinances, single unit rentals (rental buildings with 2-4 units are Insurable), purchases/transfer for properties greater than $1MM, equity take-out mortgages greater than $200,000, any mortgage with an amortization greater than 25 years.

So what does this mean when you need a mortgage for a purchase or when you have a maturing mortgage you want to transfer?

  • If it was originally insured (borrower paid default insurance – aka CMHC insurance), we can get insured rates (lowest rate tier).
  • If it was originally back-end insured by the lender (basically the same as being conventional) we can get insurable rates (2nd lowest rate tier).
  • If the mortgage was placed before October 17, 2016, we can grandfather the insurable rates even if it was a $1 million+ value house and/or with a 30-year amortization.  It then depends if it was insured (borrower-paid insurance) or conventional as to whether you qualify for insured or uninsurable rates.
  • If it was placed after October 17, 2016 and the property was over a $1MM value or had a 30-year amortization, we can only get uninsurable rates (highest rate tier).

For insurable rates we need to consider the current loan to value and the beacon score.

2 Jul

What Rate Will I Get with Today’s Mortgage Categories?

Buying & Refinancing a Home

Posted by: Garth Chapman

Once upon a time it was fairly easy to answer the question “what rate will I qualify for?”  Back then higher down-payments resulted in lower interest rates on your mortgage.  Now neither of those are the case.

Once upon a time you either had a high ratio or a conventional mortgage.

Now you will have an insured, or insurable or uninsurable mortgage.  The reference to insurance is what most people understand as a high ratio mortgage insured by CMHC, Genworth or Canada Guaranty.

Once Upon a Time:

  • High ratio mortgage – down payment less than 20%, with insurance (aka CMHC fees) paid by the borrower.
  • Conventional mortgage – down payment of 20% or more, and the lender had a choice whether to insure the mortgage or not at their own expense.

Now it is more complicated:

  • Insured – Most often a down-payment or refinance equity below 20%. A mortgage transaction where the insurance premium is or has been paid by the borrower, which often means a high ratio mortgage.
    • Interest rates are the lowest in the range.
  • Insurable – Fits all the same guidelines as an insured mortgage but the borrower has more than 20% for a down payment.  A mortgage transaction that is often portfolio-insured at the lender’s expense.  Property must be valued at less than $1MM that fits insurer rules and is qualified at the Bank of Canada benchmark rate over 25 years with a down payment of at least 20%.  Property cannot be a Rental.  The loan-to-value and your FICO (credit) score will determine what rate you qualify for.
    • Interest rates are slightly lightly higher than insured rates.
  • Uninsurable – All mortgages that can’t be insured.  Examples include refinances, single unit rentals (rentals between 2-4 units are insurable), purchases and transfers for properties with valued at over $1MM, equity take-out’s greater than $200,000, amortizations greater than 25 years.
    • Interest rates are at the higher end of the range, and are determined based on loan-to-value (LTV) %.

What does this mean when it comes to shopping for best rates and terms when your mortgage matures and you have the opportunity to move it to another lender?

  • If your mortgage was originally insured (borrower paid insurance), we can get insured rates.
  • If your mortgage was originally back-end insured (basically the same as being conventional) we can get insurable rates.
  • If your mortgage was placed before October 2016, we can grandfather the insurable rates even if it was a $1 million+ value house or 30 year amortization. It then depends if it was insured (client paid insurance) or conventional as to whether we get insured or uninsurable rates now.
  • If your mortgage was placed after October 2016 and the property value was over a $1 million or the mortgage had a 30 year amortization, we are restricted to uninsured rates.
25 Jun

Ultra Low Rate websites – What’s The Story?

About Mortgage Brokers

Posted by: Garth Chapman

Ultra low mortgage rates, offered through various internet sites, are often restricted mortgages.  You may have higher prepayment penalties than generally available in the marketplace, as high as 3% of your mortgage balance.  Low rate mortgages often do not allow an in-term transfer, which is generally referred to as porting the mortgage with you to a new home.  Many do not allow blend and increases (refinances), you must pay the penalty to do a refinance (get equity out of your home).

Low rate sites are looking for no hassle, no muss, no fuss mortgage applications.  So if you happen to be an hourly worker, does your 2 year average and your YTD income substantiate the required income to qualify?  Does your source of down payment meet new government requirements?  When will you be told if they do or do not?  Self-employed, contract worker, income from a couple of sources, you can spend a week thinking you have sent in the correct paperwork only to find out you have not been approved.  Unfortunately, it may mean your file is just a little too time consuming for the low rate site.

Low rate sites use salaried staff who need to meet production quotas.  They do not have time for problems or complex scenarios.  They are looking for the 20% to 30% of the market who have the perfectly simple scenario.

Low rate sites are not able to work through other issues, a unique property size or type, square footage issues, condo by-laws or financial statement problems, post tension cable or special assessment requirement.  Will the low rate site take the time to find the most suitable lender or insurer?  Lenders will have sliding scales, can you get an exception, can you find a new lender before condition day?

Low rate sites often entice you with the initial promise of an attractive rate and then after you have completed the application and have sent them all your documents will tell you that you don’t qualify for that rate, but that you do qualify for some other higher rate.

Low rate sites do not have the staff to help ensure the rest of the home buyer process gets completed on time.  For example, meet the financing condition date, ensure the lender instructs money to lawyer on time, and insure you get possession on time to avoid late interest charges.

Low rates sites will ask you to sign a non-compete agreement that if they present you with a commitment, you will not obtain your mortgage from another bank, lender, or broker, and if you choose to do so, you will be charged a fee.

Your Mortgage Broker has access to many of these low-rate restricted mortgage products.  So call and ask your Broker what you qualify for, and if a low-rate mortgage is a good fit for you.

12 Mar

First Time Home Buyers Plan and Tax Credits (HBP & HBTC)

Income Tax

Posted by: Garth Chapman

First, some little-known good news: you don’t actually have to be a first-time homebuyer to qualify.  A first-time home buyer you must not have lived in another home owned by you or your spouse or common-law partner in the year of acquisition or any of the four preceding years.

So now let’s unpack the First-Time Home Buyer’s Tax Credit (HBTC).

The First-time Home Buyers’ Tax Credit was introduced to assist Canadians in purchasing their first home. It is designed to help recover closing costs, such as legal expenses, inspections, and land transfer taxes, so you can save more for money for a down payment.

The Home Buyers’ Tax Credit, at current taxation rates, works out to a rebate of $750 for all first-time buyers. After you buy your first home, the credit must be claimed within the year of purchase and it is non-refundable. In addition, the home you purchase must be a ‘qualified’ home, described in more detail below. If you are purchasing a home with a spouse, partner or friend, the combined claim cannot exceed $750.

You will qualify for the HBTC if:

  • you or your spouse or common-law partner acquired a qualifying home; and
  • you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years.

Here is the link to the CRA webpage on the HBTC.