403-681-4376
8AM - 5PM Mon - Fri
103E – 1144 29th Ave NE
Mark Herman – Calgary Mortgage Broker

Payout Penalties: Nasty tricks of the Big-6 Banks – Example 1

May 4, 2018 payout penalties

Payout penalties – how the Big-6 banks get you, Example 1

Bank rates, payout penalties

Below is a great example of how the Big-6 banks get you on an early mortgage payout.

“The rate is the rate, but the details are the details!” said Grandma Herman.

Mark Herman

Top Alberta mortgage broker for home purchases and mortgage renewals

As you can see from the example below, the banks “discount rate recapture policy” can result in some pretty hefty added costs —$6,048 in the scenario here!

Example:

On July 31, 2015, you buy your first home and sign a five-year, fixed-term mortgage. As your family grows, you start looking at a bigger home, and after a few months of searching, you find the perfect one—on August 1, 2017.

Because of this unexpected upgrade, you now have to break your mortgage three years before it matures (you have $320,000 left on your mortgage). When you signed your current mortgage, you weren’t concerned about prepayment penalties, but as you can see below, prepayment penalties can have a significant financial impact on your bottom line.

Your situation
Mortgage date July 21, 2015
Date you break your mortgage August 1, 2017
How much you have left owing on your mortgage $320, 000
Your original mortgage term 5 years
How many years left you have on your term 3 years
Comparison
Mortgage breakage fee at the Big-5 banks Mortgage breakage fee with Broker Banks
5-year posted rate when you got your mortgage 5.39% Not applicable for the IRD calculation
Your actual contract rate 4.00% 4.00%
Discount 1.39% N/A
3-year posted rate on August 1, 2013 (the day you break your mortgage) 3.75% 2.99%
IRD formula (Contract rate – [Posted rate for remaining term – Discount from original mortgage]) x Principal outstanding x Remaining term (Contract rate – Posted rate for remaining term) x Principal outstanding x Remaining term
IRD payment $15,744 $9,696
Difference in fees $6,048

For  a free mortgage check-up, or pre-approval, or compare what we can do vs. your bank, call Mark at 403-681-4376

 Remember, when working with us:
• There is no cost to you for our services as the banks pay us for doing their work,
• You get our professional, un-biased advice & expertise on your mortgage,
• We answer our phones and emails, 7 days a week, from 9 – 9, including holidays,
• Your rate is lower with us as we deal through “broker services” at the banks.

Calgary Housing Market Still Strong

August 17, 2015 Calgary mortgage, economy

Below is an article that notes Calgary’s home prices are still supported.

Mark Herman, top Calgary mortgage broker for purchases and mortgage renewals

Calgary’s housing market is not under threat of a correction despite a downturn in the local economy, Canada Mortgage and Housing Corp. said in an analysis Thursday.

Its assessment of 15 metro markets lists Calgary as “low risk” while Toronto, Regina and Winnipeg were rated “high risk.” The review considered four factors — overheating; acceleration in house prices; overvaluation; and overbuilding — as of the end of March.

“The low price of oil has affected many different sectors of the economy, affecting employment and income growth, and increasing the unemployment rate. Weaker labour market conditions have also slowed migration to the region,” CMHC said of the Calgary-area market.

…

Meanwhile, Vancouver — one of the country’s priciest real estate markets — was deemed low risk, even as home prices there continue to soar. The benchmark price of a detached home in metropolitan Vancouver hit $1.1 million in July, up 16.2 per cent from a year ago, the Real Estate Board of Greater Vancouver said last week.

… Statistics Canada said Thursday that new home prices in the Calgary area rose 0.1 per cent in June.

“Higher land prices were largely offset by builders reducing prices because of market conditions,” the federal agency said. Prices were up 0.7 per cent year-over-year.

In its latest report, the Calgary Real Estate Board said the average MLS sale price for July was $476,446, down about 1 per cent from a year ago while the median price of $435.000 grew by 2.35 per cent. The benchmark price, which CREB identifies as a typical property sold in the market, was largely unchanged at $455,400.

With files from The Canadian Press

mtoneguzzi@calgaryherald.com

Twitter.com/MTone123

4 Reasons Canadian Mortgage Rates Are Going to go up Soon

May 19, 2015 mortgage rates, mortgage renewal

Here is a great summary of what is causing mortgage rates to be nosing up in the near future. They really should have gone up by now but the anticipated “Spring housing market rush” competition with the banks is holding them down.

Mark Herman, top Calgary, Alberta mortgage broker for home purchases and mortgage renewals

The latest round of economic data has real-estate watchers returning their focus to interest rates.

  1. Activity in the bond market and the latest employment numbers are fueling predictions there will be a bump in fixed-rate borrowing costs in the near future.
  2. Employment improvements are generally seen as a harbinger of inflation. That, along with other domestic and international considerations, is pushing up government bond yields, which in turn drive fixed mortgage rates.
  3. There is also the notion that the big, trend-setting lenders will be looking to move rates up to bolster profits.
  4. As well, Bank of Canada Governor Stephen Poloz has hinted he might be willing to let inflation run in order to avoid hiking the policy rate. That would also put upward pressure on government bond yields.

The graph we watch to show us this is here:

19MAY15_30dayCMBonly

Variable Rates:

  • As for variable-rate mortgages, the betting is there will not be a Bank of Canada increase until the middle of 2016, holding variable rates in place for the foreseeable future.

Canadian Reverse Mortgage – CHIP loans

April 9, 2015 CHIP / Canadian Reverse Mortgage

Here is a great article on the CHIP loan or the Canadian Revers Mortgage. And we do these as well.

Mark Herman, Calgary Alberta mortgage broker.

Reverse mortgage.

Just hearing those words creates a visceral response among some who see it as a sinister product that drains fragile old people of their home equity.

Reverse mortgage let seniors pull cash out of their homes with almost no qualifications – up to 50 per cent of their property value. The downsides include rates that are up to 2.5 percentage points higher than standard mortgages, fees and penalties for early repayment and smaller inheritances for the borrower’s heirs.

Whether reverse mortgages are good or bad depends on whom you ask. But either way, one thing seems clear: reverse mortgages are here to stay, and they’re becoming a go-to solution for a growing number of older Canadians.

In fact, the catalysts for growth are so evident that I’ll go out on a little limb and make a prediction. Within a decade, one in ten senior homeowners will sign up for a reverse mortgage, and yes, many will take them to the grave.

Here are ten reasons why:

1. Falling returns – Actuaries project that stocks, a staple in most retirement portfolios, could return roughly 1.45 per cent less than they have in the past, on an inflation-adjusted annual basis. And long-term bonds won’t return any better, especially if rising rates drag down bond prices and seniors have to liquidate their portfolios to fund retirement. With lower returns come smaller retirement nest eggs.

2. Sporadic saving – Returns aside, people simply aren’t saving consistently. Less than four in ten saved for retirement in 2014. Half of Canadians think they’ll run out of money within ten years of retiring and/or outlive their savings. A stunning 47 per cent of 55– to 64-year-olds say they don’t have a penny saved for retirement.

3. Rates have fallen – You can now get a reverse mortgage for as low as prime + 1.25 per cent for a variable rate or 4.99 per cent for a five-year fixed. These rates could drop further if funding costs fall and/or HomEquity Bank – the leading provider – ever gets nationwide competition.

4. Industry acceptance – Mortgage brokers and financial advisers will increasingly push reverse mortgages for two reasons. For one, they may be paid more as HomEquity ramps up its adviser compensation program. And two, reverse mortgages are no longer a last-resort solution in some cases. Drawing on home equity instead of liquidating retirement investments can help certain seniors save taxes, preserve old-age benefits, maximize CPP benefits, and diversify and extend the life of their investment portfolio.

5. Under-employment – Job quality is deteriorating which could make retirement savings’ shortfalls more common. It’s no surprise that more people expect to work past retirement age. And it doesn’t help that senior unemployment has almost doubled since the mid-1980s.

6. Lots of equity – More homeowners than ever (24 per cent) are relying on their home(s) as their main source of retirement income. Fortunately for seniors, home values have surged 430 per cent in the last 30 years, knock on wood.

7. More homeowners – Canada’s home-ownership rate has leapt from 61 per cent in 1984 to over 70 per cent today. In turn, more people are qualifying for a reverse mortgage.

8. Longer lifespans – In 15 years, seniors will make up 23 per cent of the population, versus 15.6 per cent today. Not only that, but we’re living longer (to age 81.7 on average, and counting). Unfortunately, costly health problems become more frequent around age 77, on average, a problem since retirement savings aren’t keeping up. Moreover, 91 per cent of Canadian boomers want to stay in their own home as long as possible. But home care isn’t cheap and it’s getting costlier every year.

Total and share of population 65 and over by decade, 1971–2080

Source: Statistics Canada (1971–2010) and Office of the Superintendent of Financial Institutions (2020–2080)

9. Bigger mortgages – Mortgage and credit line debt surged 62 per cent and 132 per cent, respectively from 1999 to 2012. If you haven’t experienced it, mortgage payments on a fixed income can be, shall we say, stressful.

10. Financial hot water – More older Canadians are having to bail out their sinking financial ship. As just one example, 21 per cent of Credit Counselling Society clients are now age 55 or older. That compares to just 5 per cent 19 years ago. As of 2010, seniors were 17 times more prone to insolvency than they were just two decades ago.

Assuming that most of these trends won’t reverse anytime soon, reverse mortgages will become a vital fallback for hundreds of thousands of Canadians in decades to come. And after 29 years in existence, they may even become a mainstream financial-planning tool.

Canada’s only national provider, HomEquity, sold 23 per cent more reverse mortgages in 2014, and that growth is just a hint of what’s around the corner. In the U.S., reverse mortgage sales have been up to 100 times greater than in Canada (mind you, interest deductibility and reverse mortgage insurance play a role down south).

There are usually better alternatives than reverse mortgages, like proper planning, downsizing, landing a renter, getting a home equity line of credit and so on. But needs cannot always be planned. A Monitor Deloitte survey last year found 845,000 – or 17.6 per cent – of Canada’s 4.8 million homeowners age 55 plus had a serious financial need and were looking for options. The above options won’t work for many of those folks.

That’s why one in ten senior homeowners may rely on a reverse mortgage within a decade.

*************

Quick Reverse-Mortgage Facts

  • Who can get one: Almost any homeowner age 55+, with no credit or income check
  • How much can you get: 20 to 50 per cent of your property value, tax-free with no payments required
  • What determines how much you get: Your age, type of home, location and existing secured debt
  • When is it paid back: When both spouses die or sell the home, or sooner if one prefers (a penalty and fees may apply if you pay off a reverse mortgage in the first ten years)

Robert McLister is a mortgage planner at intelliMortgage Inc. and founder of RateSpy.com. You can follow him on Twitter at @RateSpy

Follow Robert McLister on Twitter: @RateSpy.com

Canada #3 Place to Live in the World

November 27, 2013 Uncategorized

This is pretty interesting. I think we could be higher if the winters were not so long and cold.

Mark Herman; Calgary, Alberta Mortgage Broker

Canada Ranks #3 in Legatum Prosperity Index 2013

Published the Tuesday 26 November 2013 by Gwen at 15:00 in Business, Canada, Education, Health, News, | No comment .

The Legatum Prosperity IndexTM 2013 is out, and Canada ranks 3rd in the world for its overall prosperity, right behind Norway and Switzerland. The country’s ranking leaped from 6th to 3rd in just one year, thus confirming its position as the leader of the Americas region.

For five years now, the Legatum Institute has been compiling and comparing data of 142 countries in order to draw one of the most accurate and comprehensive portraits of prosperity around the world. Their vision is that prosperity should include not only objective economic indicators, but also subjective evaluations of well-being and development indicators as perceived by the population.

With an impressive balance between scientific rigor and user-friendly design (just play with the interactive map and shuffleboard), the website provides great insights on prosperity to both the expert and the neophyte.

In this changing, post 2008 economic crisis, post Arab Spring world, Canada’s prosperity is exemplary on economic stability and human development alike. Below is a digest of Canada’s data, grouped by LI sub-indexes and revealing the key elements that make Canada the third most prosperous country in the world.

Personal freedom: Canada ranks 1st

  • 94.1% of the population believes it’s a good place to live for immigrants (and ethnic minorities)
  • 91.8% is satisfied with their freedom of choice

Education: Canada ranks 3rd

  • The teacher to pupils ratio is 1:12
  • 79.1% of the population is satisfied with quality of education

Economy: Canada ranks 4th

  • 1.5% inflation
  • 74.6% of the population has confidence in financial institutions
  • 89.4% has access to adequate food and shelter
  • 86.5% is satisfied with their living standards
  • 45.8% thinks it’s a good time to find a job

Social capital: Canada ranks 6th

  • 42.2% of the population has volunteered in the past month
  • 68.5% has donated money to charity
  • 65% has helped a stranger
  • 94.8% says they can rely on others in times of need

Safety & Security: Canada ranks 7th

  • 12.3% of the population had property stolen last year
  • 84.3% feels safe to walk alone at night

Governance: Canada ranks 8th

  • 67.4% of the population has confidence in the honesty of elections
  • 44% believes business/government corruption is widespread

Health: Canada ranks 11th

  • Health expenditure is $4520 per capita
  • Immunization rate against infectious diseases is 95%
  • Life expectancy is 80.9 years

Entrepreneurship & Opportunity: Canada ranks 16th

  • Business start-up costs 0.4% of GNI per capita
  • 78.5% of population thinks it’s a good place for entrepreneurs to start a business
  • Innovation: Canada earns twice as much in royalties than the world’s average

Adapted from The Legatum Institute website.