Top Calgary Mortgage Broker

Updates to CMHC First Time Buyer Incentive Program

In March the federal government unveiled changes to the budget that included an interesting opportunity for prospective first time home buyers through an enticing program that they called a “shared equity mortgage”. This program could see Canada’s housing agency (CMHC) kicking in up to 10% of the purchase price of a home if certain conditions are met, therefore brining down the mortgage load and monthly payment for first time home buyers. In June, the federal government released further details for the new CMHC program. Under the fine print for the First Time Home Buyer Incentive Program, which will officially launch in September, the program is limited to first time buyers who earn under $120,000 annually. The CMHC would kick in up to 10% of the purchase price of the home, as long as the borrower comes up with the minimum down payment for an insured mortgage, which is currently 5%. An additional stipulation is that the total value of the mortgage, plus the kick in from CMHC don’t exceed $480,000. According to government officials, this means the program will really only aid those shopping for properties worth a maximum of about $565,000, regardless of whether or not they have met the other requirements. The “loan” from CMHC would be interest free, meaning no compounding costs to pay down, like a mortgage does. In exchange for its stake, the government says CMHC would get to participate “in the upside and downside of the change in the property value” – meaning they would be entitled to any corresponding increase in the value of a home when the buyer sells. On the other hand, CMHC would also be responsible for any share of the loss if the property depreciates. This means on a home costing $500,000, if the buyer contributes $25,000 (5% down payment) and CMHC kicks in the same amount, CMHC would own 5% of the home. If the home were to appreciate to $600,000 when the home owner wants to sell, they would have to pay 5% of the sale price – in this case, $30,000 – not the original $25,000 CMHC contributed to begin with. Therefore, there will always be a bill to pay down the line. With that said, the kick in from CMHC would reduce the mortgage load and monthly payments, therefore making it easier for first time buyers to save over the life of the loan. This table from CBC News shows the impact of a borrower of CMHC’s program. On the left is the cost if they went it alone. On the right shows how qualifying for CMHC program makes the same house more affordable:

Savings Over Time

While many are in support of the new program because it will help first time buyers and families across Canada, some financial advisers are not so sure. Rajiv Bissessur says “the program will likely help some people, but ultimately it amounts to just another form of debt for over leveraged borrowers.” It is an interest free loan, but a loan that will need to be paid back nonetheless. Bissessur also said the cap of $480,000 won’t do much to help people who are shopping in more expensive markets, who are ultimately the people who need it the most. The program must be paid back within 25 years, or whenever the buyer decides to sell. There is no financial penalty for buying CMHC out of its stake at any time, however homeowners will have to pay CMHC the fair share of the value of the home at the time.

We have yet to see if this program will prove to be “worth it” or if it is election promises.
Mark Herman, top Calgary Alberta mortgage broker
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Variable rates to hold steady for 2019

Here is the latest on changes to the Prime rate for variable mortgages. The news is good as Prime is now expected to stay the same for the balance of 2019!

Remember:

  1. Variable rates can be locked in at any time for what the rates are on the day you lock in on.
  2. The maximum payout fee for is 3 months of interest

Rate hike disappears over the horizon

Apr 22, 2019 from First National Financial LP

The likelihood of a Bank of Canada interest rate increase appears to be getting pushed further and further beyond the horizon. Read More

the WORST: Mortgages @ Big-6 Banks

This blog summarizes why getting a mortgage from 1 of the Big-6 banks is the worst idea:

RBC: Mortgage Mistakes

RBC made what I think are some some pretty serious – and costly – mistakes for their customers and it is too bad … for the customers!

My 2 favorite quotes from this article are:

“My husband and I both felt pretty robbed,” she said. “I feel … it was deceptive.” Read More

How the Big-5 Banks Trap You in Their Mortgages

Yes, the Big-5 banks do not love you, they love your money.     Now they can “trap” you in their mortgages with the Stress Test to get more of your money that they love!     Highlights of the article below show how the new mortgage rules – called the B20 – allow the banks to renew you at almost any rate they want – or at least not a competitive one – if your credit, income, or debts should mean you can’t change banks.     If your mortgage is at your main bank they can see:
 
  • what your credit score is
  • your pay and income going into your accounts
  • your debt payments
  • other debt balances on your credit report
  • your home/ rental addresses so they can accurately guess at your home value.
  AND this means they can calculate if you can pass the new “Stress Test.”     If you can’t pass it then they know you can’t change banks, are you are now totally locked into them for your renewal. They can renew you at POSTED RATES … 5.39%, not actual discounted rates they offer everyone, today about 3.69%.     The GOOD NEWS is broker banks do not do any of this … so having your mortgage at your main bank only helps them “grind you” later on. …. so how convenient is having your mortgage at your bank now?  

Highlights of the article link below are:

Canada’s biggest banks are tightening their grip … as new rules designed to cut out risky lending make it harder for borrowers to switch lenders …  the country’s biggest five banks … are reporting higher rates of renewals by existing customers concerned they will not qualify for a mortgage with another bank. Read More

Inverted Yield Curves, Impacts on Prime Rate Changes and Variable Rate Mortgages

Summary:

For the 2nd time in 50 years the “Yield Curve” has inverted – meaning that long term rates are now lower than short term rates. This can signal a recession is on the way.

This Means …

  1. Alberta will look better comparatively to Canada’s hot housing markets which should finally cool down.
  2. Canada’s Prime rate increases look to be on hold until Spring. This makes the variable rates now look MUCH Better. There were 3 rate increases expected and these may not materialize – making the VARIABLE rate look better.
  3. Broker lender’s have VARIABLE rates that range between .1% and .65% BETTER than the banks do. If you are looking at variable rates we should look further into this in more detail.

DATA BELOW …

  1. More on the predictions on rate increases
  2. WTF is an inverted Yield Curve – lifted from “the Hustle”

 

Predictions on Prime

Three interest rate hikes in 2019 — that’s what economists have been predicting for months, as part of the Bank of Canada’s ongoing strategy to keep the country’s inflation levels in check. But, according to one economist, that plan may have changed.

The BoC held the overnight rate at 1.75 percent yesterday, and released a statement a senior economist at TD, believes hints that the next hike may not come until next spring.

“We no longer expect the Bank of Canada to hike its policy interest rate in January,” he writes, in a recent note examining the BoC’s decision. “Spring 2019 now appears to be the more likely timing.”

Meanwhile the Canadian rates and macro strategist at BMO, puts the odds of a rate hike in January at 50 percent.

“While the Bank reiterated its desire to get policy rates to neutral, the path to neutral is clearly more uncertain than just a couple of months ago,” he writes, in his most recent note. “Looking ahead to January, the BoC will likely need to be convinced to hike (rather than not).”

A VIDEO ON WHY VARIABLE RATE MAY BE THE WAY TO GO FOR YOUR PLANS

  • https://vimeo.com/279581066
  • This video is from my colleague Dustin Woodhouse and he perfectly presents the story on the variable. He also ONLY works in the BC Lower Mainland; if you live there HE should be doing your mortgage, if you don’t WE should be.

2.      WTF is an ‘inverted yield curve,’ and what does it mean for the economy? Read More

Your Banking Relationship: They leverage your mortgage to rake in credit cards profits.

Below is part of an article where the bank is sad their mortgages are down 500% from last year. At the same time they made 16% more from ramming credit cards and Lines of Credits down their mortgage customer’s throats so it’s all okay in the end. For them… and how about for you?

The blue part shows that mortgage is the key to create what customers feel is a “relationship” with the bank so they can then sell you all their high margin products.

Broker lenders only “sell” 1 thing, mortgages, so consider separating your banking and your mortgage and get the best mortgage possible – through a broker lender.

 

“Having your mortgage at your bank is only convenient for them to rake it in off of your credit card fees.”

Mark Herman, top Calgary mortgage broker

 

Here is the article:

Bloomberg News, Doug Alexander, August 23, 2018 …

Canadian Imperial Bank of Commerce’s prediction of a mortgage slowdown has come true…

Despite the mortgage slowdown, CIBC posted a 16% jump in Canadian personal and commercial banking earnings due to a “significant” expansion  … and growth in credit cards and unsecured loans amid rising interest rates, Chief Financial Officer Kevin Glass said.

“Those would be the major offsets in terms of mortgage growth declining,” Glass said in a phone interview.

“Mortgages are a key product for us — it’s very important from a client relationship perspective — but it’s not a high margin product, Read More