4 May

Is Your Mortgage Pre-Approval Really a Pre-Approval?

Mortgage Tips

Posted by: Garth Chapman

It is important to understand the difference between a fully underwritten ‘Pre-approval’ and one that is truly only a ‘Rate Hold’.

  • A basic Pre-approval that is not underwritten, and that often does not even include a requirement for all the documents that will be needed to underwrite an actual purchase.
    • What you have is a piece of paper that does nothing much more than hold a rate for you, which is only of any value to the borrower if that borrower actually does end up meeting the qualification criteria for a mortgage on an accepted offer to purchase.
    • If you don’t qualify, you will have wasted much time and effort, and also that of your Realtor and the Sellers Realtor, and…well you get my point.
  • A proper fully underwritten Pre-approval where the borrower submits all the documents that will be later required, and the file is then underwritten by a mortgage lender (not many will do that because such a low percentage (around 15%) of Pre-approvals actually become a purchase.
    • Properly done, this gives the borrower a clear path to making a purchase knowing there will be no surprises on the financing element of the purchase.

At Jencor, we will:

  • Collect from you all the documents that will ultimately be required so there will be no surprises later on.
  • Our  professional Underwriting Team will fully review and underwrite your complete file.
  • We will also submit your file to at least one Mortgage Lender that will also underwrite your file and will issue a Pre-approval.
  • That Pre-approval will also include a rate hold that will protect you from any potential rate increases during the 90 or 120 days that the Pre-approval runs for.
  • All of which means that your Pre-approval will be worth well more than the piece of paper it is written on.

So now when your Banker or Mortgage Broker says you are Pre-approved, you now know what to ask them about to know what you truly have.  And you also will know what to tell your Realtor what you have.

4 May

WONDERING WHAT YOU SHOULD BE DOING WITH YOUR MORTGAGE IN TODAY’S MARKET?

Mortgage Help

Posted by: Garth Chapman

EXISTING VARIABLE RATE BORROWERS

  • Sit tight – your rate likely includes a large discount to the Prime rate.
  • Banks & Mortgage Lenders have dropped their Prime Rate to 2.45%.
  • If you are considering converting to a fixed rate (aka ‘locking in’), enjoy your newfound savings for a while fixed rates settle down, which they have been doing.
  • Contact me to learn how to create some simple rules so you will lock in at the right time.

NEW/RENEWING BORROWERS

  • Ensure flexibility when selecting your mortgage product.
  • Variable rates can be converted (locked in) to Fixed at any time, and the Variable product comes with the smallest penalties for early payout, being 3-months interest as mandated by federal regulations.
  • Conversion rates (from Variable to Fixed are not always the best rates in the market, so expect to pay a bit of a premium when you convert (lock in).
  • Do the Math with your Mortgage Broker: compare costs of shorter-term fixed rates to 5-year fixed rates with penalties included (the results may surprise you).

EXISTING FIXED-RATE BORROWERS

  • The 5-year Government of Canada Bond yield is at an all-time low, currently just under 0.40%. This bond yield is a major factor normally in pricing 5-year mortgage loans for Canadians.
  • Fixed rates moved higher in early April as liquidity tightened up for the banks and began slowly dropping by mid-April.
  • We are now in early May they are still dropping and may have a bit of room to go lower yet, although we are very close now to the very low rates of early March before the world was turned upside down.
  • Rate competition typically intensifies during the spring real estate market, which may well be delayed into summer this year.

STRETCHED BORROWERS

  • Cash-flow may be your most important imperative to get you through this.
  • Refinance if it improves your cash-flow or if it reduces your risks.
  • Don’t wait until it’s really raining hard to reach for your umbrella – it will be harder to borrower as we get further into this economic down-turn than it is now.