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 are 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.

B-20 has created higher renewal rates for the big banks, driving volumes and goosing their growth rates,” said Eight Capital analyst Steve Theriault. “It’s had the unintended consequence of reducing competition.”

Royal Bank of Canada (RBC), the country’s biggest lender, said last month that mortgage renewal rates [are up …] due in part to the B-20 regulations and also to improvements it has made to make it easier for customers to renew.

Ron Butler, owner of Toronto-based brokerage Butler Mortgage, said the changes leave borrowers with less choice.

“Even if they are up-to-date with their repayments, borrowers may find they don’t qualify with other lenders so they’re stuck with their bank at whatever rate it offers,” he said.

Senior Canadian bankers such as RBC … and TD … voiced their support for the new rules prior to their introduction, saying rising prices were a threat to Canada’s economy.

While analysts say RBC and TD are expected to benefit from higher-than-normal retention rates in 2019, not everyone is sure borrowers will benefit.

“The banks are becoming more sophisticated in targeting borrowers who would fail the stress test and they can charge them higher rates at renewal knowing they can’t move elsewhere,” Butler said.

Link to the full article is here:

We saw the “Mortgage Renewal Trap” coming long ago when the Stress Test was announced. It is more important than ever to consider Mortgage Broker Lenders for your mortgage now.

Mark Herman, Top Calgary Alberta Mortgage Broker.

Schedule of Increased Alberta Real Estate Fees

Here is a schedule of the actual increase in fees.

For my comments on what this all means see my last post here

Please contact me by phone at 403-681-4376 or my email at


  • Increases are only for 5% down payment buyers.
  • Clients who get submissions in prior to June 1st will be eligible for old premiums.
  • Effective June 1st, (owner occupied 1 – 4 unit) mortgage loan insurance premiums will be:
Loan-to-Value Ratio Standard Premium
Standard Premium
(Effective June 1st, 2015
Up to and including 65% 0.60% 0.60%
Up to and including 75% 0.75% 0.75%
Up to and including 80% 1.25% 1.25%
Up to and including 85% 1.80% 1.80%
Up to and including 90% 2.40% 2.40%
Up to and including 95% 3.15% 3.60%
90.01% to 95% — Non-Traditional Down Payment 3.35% 3.85%

 All this from Mortgage Mark Herman, top Calgary Alberta mortgage broker for home purchases and mortgage renewals.

Newly increased fees for home buyers – comments

The new fees are not that big a deal. It will add a bit but not much. All the news is just noise by the press looking to turn out an easy article. Below are my comments that will be in the Calgary Sun this week.

Mark Herman, top Calgary Alberta mortgage broker for home purchase mortgage and renewal mortgages.

The additional $1,925 added to mortgage costs ends up costing an extra $8.81 a month for a $450k purchase – the average home price in Calgary – with 5 per-cent down on the maximum 25 year amortization.

“This really should not be that big a deal in the overall picture. We’re talking about the most expensive purchase most people make. An extra $2450 should not be a deal breaker. If it is, the buyers should really second think their continued ability to afford a home, especially if you consider that interest rates are at all-time 115-year lows. A rate increase, even back to what is considered the theoretical minimum of 4 pre-cent for the 5-year fixed, closed mortgage, should be considered more than this minor cost increase.”

For an average home at $450,000, the new increases with the budget for land title registration cost AND the new CMHC insurance premium for 5% down – from 3.15% to 3.6%:

The increase in the CMHC fee goes to $15,390 from $13,466 or an increase of $1,925.

The increase in the land title registration cost – attached – is an extra $525.

Total increase is $2,450 or 0.5% total increase in the costs to buy a home with 5% down payment.

Really not a big deal when you consider:

  • Alberta does not have a 1% property transfer tax like B.C. and Ontario
  • The cost for registration and land titles was cut by Ralph Klein years ago and has not increased since
  • Buying a home for almost half a million dollars has only increased by 0.5% and
  • Mortgage rates are at, and continue to hold at, now record lows; most mortgage broker rates are 2.69% for a full featured, 5 year mortgage with all the bells and whistles.

Fee increases may cause sticker shock for potential Calgary homebuyers

Fee hikes in Thursday’s provincial budget will add more than $1,000 to the cost of buying an average home in Alberta …

… The province said several real estate-related fees will increase effective July 1. Among the announced changes, the transfer/title creation flat fee rises from $50 to $75, while the variable fee will jump from $1 to $6 for each $5,000 in home value. Mortgage registration fees are to increase the same amount.

On a $450,000 mortgage, that would mean an increase from $140 to $540 for each.

“Unfortunately, these fees are assessed at the end of the real estate transaction and so are not included in the purchase price of the house, nor can they be rolled into the mortgage, so homebuyers will need to come up with that extra cost,” Copeland said.

Corinne Lyall, president of the Calgary Real Estate Board, said the government has kept fees low for some time. This is the first time since 2011 that the flat fee for property and mortgage registrations has increased.

Medical Doctor Mortgage Program – mortgage financing on your projected income!!


ATTENTION soon-to-be-Doctors – FINALLY a program that acknowledges that you will be earing lots of money – soon, but not just yet.

Medical Doctors still in school or residency can qualify for financing with 20% down payment (up to 80% LTV) using projected income.

More details:

  • “Projected income” is based on what a medical doctor is expected to earn in their specialization of practice.
  • existing student loans, or student line of credit are fine
  • the 20% down CAN BE borrowed funds from a Line of Credit, or other source
  • part or all of the 20% down CAN BE gifted from a family member
  • there is NO sliding scale – which means if you want a 1,200,000 home and you have the 20% down ($240,000) then it can still work!

Call for details and a quick chat on the phone: 403- 681-4376

Mark Herman, Top Calgary, Alberta Mortgage broker for doctors and renewals.

How the new math on LOC’s is calculated.

Below are how the banks now have to take your debts into account for doing the qualifying math for your purchase. A bit complicated and not intuitive at all!

Mark Herman, Top Calgary, Alberta mortgage broker for renewals.

Secured LOC – Calculate the monthly payment on the balance amortized over 25 years using the contract rate. **Must have the statement showing the contract rate otherwise the current BoC rate will be used.

Unsecured LOC – or a Personal Line of Credit = 3% of the outstanding balance a month for the payment – so 20,000 owing @ 3% ends up as a $600 a monthy payment. YES, it is unfair.

Student Loans –

  1. If it’s a true student loan it should be reporting as an installment with CDA. If there is no payment, the bank will use 1%.
  2. If the debt is reporting to the bureau as a revolving LOC, and the client is paying interest only payments, the bank must use 3%;
  3. if we can  provide proof that the LOC has a fixed payment and the loc has been re-written as a loan and is no longer revolving the bank can use this payment vs. 3%. In some cases, this may already be the case but it still reporting to the bureau as revolving.

Divorce and Mortgages

We do lots of mortgages for divorces – because they are complicated. Both people want to buy after or one buys out the other. BUT, you have to set the seperation agreement up correctly so this can happen.

Banks mess this up EVEY time as the math is complicated and people at banks are not licenced mortgage brokers 99% of the time.

Why not use the #1 mortgge brokerage in all of Canada for 2 years in a row to ensure your seperateion agreement is set up to work for both of you?

Mark Herman, Calgary Alberta mortgage broker and divorce mortgage specialist.

Below are some interesting numbers for Divorces:

If the Calgary- Red Deer – Edmonton Corridor was an actual country it would have:

  • a growth rate only 2nd to China – in all the world and
  • the highest divorce rate in all the world.

Other Key Findings
•Annual average of divorces in Canada: 71,000
•Marriages that won’t reach their 50th anniversary: 43%

Divorce Rates around the World
Sweden 55%
US, Australia 46%
United Kingdom 43%
Canada 40%
Israel 26%
Switzerland 25%
Greece 18%
Singapore, Poland 17%
Spain 15%
Italy 12%
Marriage rate in Newfoundland and Labrador 54.3% (highest in Canada)
Marriage rate in Quebec 37.5% (lowest in Canada)
Month with the highest Separation applications? January

Mortgage Rules for Divorces, updated for MArch, 2015:
In situations where two parties are on title to a property in the process of a legal separation where one party will keep the existing property, the following guidelines will now apply:

•Applications may be submitted as a purchase loan up to 95% LTV – or 5% down
•Both parties must be on title to the property prior to the legal separation
•Since this purchase transaction is non-arms length, a full internal appraisal is required

•The following documents confirming the sale price and transfer of title must be on file:

  1. Finalized separation agreement
  2. Offer to purchase

Alternative Canadian Mortgage Lenders


According to data compiled by CIBC World Markets (based on Statistics Canada figures), the value of loans from alternative lenders has increased by 25% this past year. In comparison, the overall growth in the mortgage market for 2014 was 4%.

As the number of alternative borrowers grows, it’s important to find a top Calgary Alberta mortgage broker that can provide customized solutions and deals with common sense lenders. We specialize in alternative lenders that have financial solutions to meet:

  • Clients who don’t fit the traditional ‘A’ lending / or bank guidelines.
  • Self-employed or commissioned clients with stated income.
  • Salaried clients with a GDS/TDS that doesn’t meet traditional bank requirements.
  • Clients with bruised credit due to extenuating circumstances.
  • Clients with outstanding Canada Revenue Agency debts.
  • New immigrants to Canada.
  • Sophisticated residential real estate investors.
  • Clients who can demonstrate a reasonable ability to make future mortgage payments.

All of our solutions are customized to fit the specific needs of the borrower—bringing them closer to their financial goals.

Call me, Mark Herman, Top Calgary Alberta mortgage broker, to talk about any of these products for your specific situation.


Tricky changes to the mortge rules

Here is one of the changes of the mortgage rules that is now in effect – called the B21 Rules.

It will be sure to cause surprise for some customers that have large Line of Credits – LOCs

How the banks are now calculating monthly payments for secured lines of credit:

  • The outstanding balance (not the limit) will now be amortized over 25 years using the Bank of Canada 5-year benchmark rate to determine the monthly payment

What that means …

For the calculation of your QUALFYING INCOME – as in, the way the government says your mortgage math is done – your total balance on your LOC is now treated:

  • as a mortgage
  • with a 25 year amortization and
  • the rate used to calculate the monthly payment is the government’s “benchmark rate” which is about 5%.

This number is now used as your payment, not what the payment actually is.

CMHC Rate Increase & More…

This is the blog version of the Winter Update 2014:

Insurer Rate Increase – Technical Details – and the B20 Rules Phase In.

1. Much to do about nothing: CMHC increases mortgage insurance.

  • May 1st the new CMHC fee increase goes into effect.
  • Genworth quickly followed, matching the effective date and premium increases. Canada Guaranty has not yet but is expected to increase their rates by the same amount – so rates for all will be the same but are not right now.
  • To AVOID the increase:
    • The purchase must be underwritten and submitted to the insurer by the bank BEFORE end of day April 30. We will still be in the Spring rush so banks may be backed up; it is important to avoid last minute rushes during this time.
    • The fee is inconsequential. A $400,000 mortgage has a monthly payment increase of less than $10.

Down Payment

OLD: One-time CMHC fee added to mortgage

New fee

May 1, 2014













Nowhere in the news: Very little is being discussed on self-employed borrowers without traditional proof of income. Their premiums are going up as well.

Down Payment

OLD: One-time CMHC fee added to mortgage

New fee

May 1, 2014
















Bottom line: for those qualifying on their tax paid income- much to do about nothing. For those needing to use self-employed “declared” income, there is a much greater premium increase.

2. More Importantly – Full Implementation of the B20 (and soon the B21) Rules

  • Some of the banks are already underwriting with the new rules causing unexpected declines and delays.
  • Banks are about to start using 3% of the balance for unsecured loans and credit cards as the monthly payment. Right now some are and some are not.
  • Clients that have multiple properties or want to keep their existing home as a rental, to purchase another property are increasingly having a difficult time for various different qualification reasons. (rental offsets or rent added to income, secured lines used for down payment etc.)

Bottom line: Buyers that are close to the limits of the lending guidelines may no longer qualify. Many of them are self employed buyers but even the first time home buyer with a little bit of credit debt are having trouble.  It is important that a buyer’s application is presented properly to the right lender and the right insurer the first time.

The Mortgages are Marvellous Advantage

Why not take advantage of the skills, years of experience, and non-biased advice of a professional, dedicated, top- broker with top-tier access to a variety of lending institutions for your buyers?

We fully pre-qualify your buyers before you go shopping: Your pre-approval is fully underwritten by a past senior bank employee. Income, down payment and credit information are in the file upfront and any wrinkles are ironed out before putting in an offer.

Mark Herman; AMP, B. Comm., CAM, MBA- Finance

Katie McDowell ; Broker of Record

WINNER: #1 Franchise for Funded $ Mortgage Volume at Mortgage Alliance Canada, 2013

Mortgage Alliance  w Mobile: 403-681-4376  w  Secure e-Fax: 1-866-823-1279


the B20 !!

There will be lots more on THE B20 – as it is the #1 issue with getting real estate deals approved right now.

To start with, that the B20 is:

  • Needs multiple financing condition extensions
  • Pre-approvals collapse at the bank and with on-line or inexperienced brokers
  • Seemingly strong purchasers outright and irreversibly declined
  • Losing out in multiple-offer situations
  • Approvals taking forever


The reason you are having a tough time removing financing conditions (COF) for your deals is called “the B20” and the details are attached. Have a read to find out why. Better yet, feel comfortable suggesting your clients use 1 of Canada’s Top-10, full-time, professional, fully-independent, mortgage brokers with a Master’s Degree in Finance, who knows what these rules mean and how to get your deals done. On time.

 OUR SYSTEM, proven during the ‘06 – ‘07 boom, gives you the winning edge in multiple offers most of the time. BEFORE clients go shopping we get all the docs in. They are then reviewed by our past-head-underwriter (with $18 Billion in residential mortgages written) who discusses directly with the bank underwriters. We know the deals will work BEFORE they write an offer. In multiple offers we review the file to shorten condition time and work with you to write the winning offer.

More Data – and on my blog @

New mortgage guidelines have been issued to ALL mortgage lenders by OSFI – the Office of the Superintendant of Financial Institutions – causing every lender to modify their policies which:

  • Significantly restricts the LTV (Loan-to-value) and overall qualification of mortgage amounts.
  • Demands significant additional scrutiny and verification of ALL client documentation – banks can no longer paper over problems like before; causing many more outright, irreversible declines.
  • Causes many banks and non-professional mortgage agents to take way too long to present approvals or produce irreversible “declines” on mortgages that were not properly documented or packaged.

Using an experienced, full-time, professional, high-volume mortgage broker is the best way to ensure your deals are completed on time, the first time. Why risk an irreversible decline for your client by using any random broker?

10 Year Term – Best Ever!

10-year fixed, full-featured mortgage is @ 3.69! (Portable, Assumable, Standard 3 month payout fee) See my comments in the Calgary Sun – full article on home page of my website: