The Tricky Thing About Rates, When Your Under 80% Loan to Value....

I will dive right in. The rate market is a tricky thing currently for most regular people to understand. They see rates posted online that seem amazing, do their applications and then find out the rate changed somewhere in the process and not for the better. Response, anger - usually at the broker or banker they were dealing. So let me try to break this down a little so that it may begin to make more sense. Since the newest Government changes we have the Stress Test, this one everyone know, except not everyone knows what it means. In a nut shell, any insured mortgage needs to qualify at the Bank of Canada Rate (5.34% as of April 23, 2019) regardless of the actual paid rate on the mortgage. Now here is some information most people do not know, so buckle up as this road gets a bit bumpier.

Rates change based insured, insurable or uninsured and then again for insurable your loan to value comes into play for the rate as well. Insured means, CMHC or GE insurance premiums are included and paid by you the client in the mortgage. These mortgages most know are anywhere from 5%- 19.99% down and are the cream of the crop for mortgage rate provided. Uninsured, we know means no insurance premium paid and no mortgage insurer on the mortgage, these rates surprise surprise are actually most times, higher than the insured rates. What what?! Hmmm, how does that make sense? Does that mean that you are paying more in the long run? The answer will surprise you, most times when I do the math out (amortization schedules etc) you are paying less interest at the higher rate & not paying the CMHC premium. I am talking 19.99% down vs 20% down to keep it simple. So if you had a higher rate and no CMHC you are actually paying less interest and your mortgage amount will be lower at term vs paying the lower rate and including CMHC. I know mind blown right! Basically if you have 20% down, you are still good at the higher rate (most times) vs putting down 19.99% to get the lower rate.

Now add this, there are insurable rates. Insurable rates are premium rates, that are dependent on your loan to value, and are insured via CMHC or GE but the premium is paid by the lender vs you the client. The usual steps are >65%, 65.01%-70%, 70.01%-75% and 75.01%-80%, and from these 70% and under getting the better rates vs 70.01% to 80% loan to value. These rates are usually better than the uninsured rates, and most times at the insured rates to a bit higher.

Why does this matter you ask? Let me explain. If you are transferring your mortgage between lenders, say TD Canada Trust to MCAP Financial because MCAP offered a better rate than TD. If your original mortgage with TD was not insured you can still get insurable rates (vs uninsured), but you have to follow Insurer Guidelines and your loan to value plays a big part in what that rate will be. So lets say your property came down in value, and your loan to value is closer to 80%, your rate will be different than if your property value comes in under 65%. Most times as brokers we rely on what you the client tells us first for value (what did you buy it for? what do you think it is worth? what does the City say?), we do look up assessments to check and the lender always requires an appraisal in anything between 65.01-80% loan to value. As mortgage brokers we are not licensed appraisers, so we go based on your information until the official appraisal is on our desk. So imagine, you have lost money on your condo, and you are told one rate originally and in actual fact, once official value comes in, your rate is higher. Que head explosion!

Usually it is your broker that is taking the brunt of this frustration, as we are the ones to tell you the news. This is no cake walk for us either.  Most of the time we have explained the rate scenario to you, but like most things, the original rate promised becomes a sticking point and all the pre discussions about rate go out the proverbial window. Let me explain this more, as the broker we do not like finding out the loan to value has changed and that we have to tell you your rate has to be increased. As mortgage brokers our goal, our main goal, is to make sure you the client is happy. Increasing rates makes no one happy... no one. But remember to scale it back, we are still working for you within ever shrinking guidelines, most times using out own commission to pay down your rate close to that original promised rate. Remember commission is how we get paid as well, how we feed our own families, while we strive to do our best to help yours.

The rate market has become complicated and having a professional work for you has become more important than ever, but please one small favor. Try not to bite the head off your mortgage professional because something like property value came in higher than was originally wanted. This is 100% not our fault and take a breath, it is not your fault either, it is not even the appraisers fault. In the end markets create value, markets control rates etc etc.... this does not mean that you perfect mortgage is not attainable, it may just be slightly different but no less awesome.

Woman In Top Positions In Business

 

Hearing about Indra Nooyi stepping down from Pepsi as CEO, has gotten me thinking about woman in industry, more specifically woman in top management and Ceo positions industry. 

Woman in top positions have become a hot topic as of late, and one I am happy is happening. Woman empowering other woman is not only a good thing on a personal level but also a business one as well. When I look at different companies online; more specifically their management staff and CEOS, I am not surprised when I see this as a more male dominated area (again yes, depending on the industry). Do not get me wrong, the "right person for the job" needs to happen, regardless of sex. However that said, I do see at the top in a lot of companies, that it tends to stick with the traditional "boys club". I have received questions from employers that I am sure they do not ask any male employee, such as "how well are you going to handle the work load with the kids?". I tend to take a breath here and use it as a teaching experience for the person that just posed the question. My answer has always been "I just do". As woman that wants a career, we learn early to delegate and work out systems that allow us to do so. Woman in top powerful positions have a lot of systems in place to help them (Indra mentions this as well). 

I think as woman with careers, we have to plan more, be able to be more detailed and multi tasked in our thinking. I know I do; we do a lot and can get burnt out easily - so we learn to be more efficient. We can do it all, but not all of it well; so everyday has to be a choice, like Indra says, usually several times a day. I remember watching her interview and was blown away with the honesty in which she spoke. "Bilogical clock and career clock are always in conflict...". As well as how much the things she said resonated deep in my soul. If you want to watch the interview here is the link, it is pretty amazing, and you will see why I am saddened to see her step down. ( https://www.youtube.com/watch?v=KzLpryLUYsk )

I grew up in a family of strong woman, a grandmother that was a nurse and a mom that became one of the first ER doctors (when she was in school she was one of the few woman in medicine as well wanting to become a doctor!). She was always working, but when she was home, she was home. She always pushed us to be more, to be what we wanted and I do not remember there ever being a difference with that expectation between me and my brother. She wanted us both to be what ever we wanted and made sure we had the tools available. Because of her and other strong woman I have met and continue to meet, I strive to be the same. 

Be the best at what you love to do, grow, change, evolve, push forward to what ever that maybe. The world is changing slowly on how they look at woman in power positions - but change is slow, but the conversation is always a good place to start. And seeing woman like Indra is always inspiring!

 Let me know what are your thoughts on this? 

What do you think about the current press about Indra Nooyi stepping down as Pepsi CEO?

What do you think are the challenges woman face in industry and the corporate ladder? are there any? or are there too many? 

Note: this is not a shot at the wonderful males in top industry, more of a thought due to a wonderful strong woman stepping down and all that entails.

Banker vs Broker ...

So I came across an article in the Globe and Mail the other day titled, "Mortgage seekers wonder: Broker or Bank?" And I gotta say, as a mortgage broker whom has come from the banking industry it has left me with a few unanswered questions. But lets see if we can break this article down a bit shall we?

"Among the many tough decisions first-time home buyers face is whether to use a mortgage broker or rely on a bank to secure a mortgage." Is how the article starts, so lets start playing with this puzzle shall we. This statement, '...or rely on a bank to secure a mortgage...", did the author of this piece not understand that mortgage brokers can use banks to secure mortgages for their clients? Several in fact. Myself here in Alberta, I can use TD Canada Trust, Scotiabank, Canadian Western Bank to name a few.   

Another puzzle piece is in paragraph 3, "...The latest, passed last fall, requires those who are applying for an insured mortgage to show they can afford to pay it back even if interest rates rise...". This is referring to the Stress Test, that was one of the new rules put into place by the Federal Government recently - however to be clear, it was not put into place in regards to just paying back a mortgage. One of the reasons it was put into place was for if and or when interest rates rise, the homeowner would still be ok with making his or her mortgage payments going forward. To make sure that they are qualifying for a home they can actually afford long term. Because lets face it, for most of us, a mortgages is a 15-25 year commitment. However this only changed the way 5 year term mortgage were qualified, as all other terms and variable rate mortgages already had to qualify under this condition.

The article goes on to quote something that I have stated over the years in various fashions, from a mortgage broker in Vancouver, "..."If you go to the bank, and if they provide their approval, they may not have the most favourable options. Or, if they simply decline the file, you have to start from scratch with another lender," he explains. "Whereas with a broker, we can take you to 40 lenders and it's only one credit check. Mortgage brokers have access to lenders that a bank doesn't, because a bank has access to just that bank...". Further into the article, it states "...A bank, however, can help clients paint a wider financial picture...", quoting the vice-president of home equity finance at Royal Bank of Canada.

Maybe because Mothers Day is just around the corner, but I had to stop here as my mothers voice drifts through my head, "Darling how well do you think that will work out if you do not focus? Remember, 'Jack of all Trades - Master of None'". As she was making me focus on my homework one assignment at a time vs me doing parts of everything all at once and nothing being completed with my best work . Does anyone else remember hearing this quote? Or being in the same situation? A mortgage broker is licensed in mortgages - this is what we do and 'toot-toot', we do it well. Small example, I do not claim to know the best savings account that you should have your money invested in, or which lender has the best business accounts to help you run your new business... these are not my areas. I would refer my client to a banker in this case, as this is for sure an area they excel in. Investing, yes as a banker I had to have my securities exam completed - but I know that my referral partners that live and breath investments are the better choice here. Why? cause this is what they do. If your Financial Service Advisor says, they know everything about Mortgages, Investments, Insurance and Accounts - that may actually be the case (I definitely can not speak for everyone on Planet Earth), but for only that one Financial Institution that they work for. So is that one Financial Institution really the best place to have all your finances? Again I hear my mother, "Is it really good to have all your eggs in one basket?". So question to you, Is it?

Later into the article there is a quote from the vice-president of mortgages and lending for Canadian Imperial Bank of Commerce, "...You have to connect with somebody who looks at it beyond just the mortgage transaction..." - I have heard variations of this for sure and I agree. Financial well being is not just your mortgage transaction. While your mortgage transaction is one of the largest most people will do in their lifetime, it is not the only thing they will do. Cars, family, planning, retirement etc are all part of it and need to be part of the discussion and thoughts along the way. It is why you will never hear a mortgage broker state, "I can do it ALL!" ...or at least you never should hear that from a mortgage broker, for sure it would never be uttered from my mouth. However what I can offer my clients is access to my referral partners, Realtors, Life Insurance Brokers, Investment Brokers, Bankers (yes bankers because sometimes clients need their account sets up or access to other accounts), honestly sometimes I am even referring them to a Massage Therapist or Acupuncturist etc if it has come up in the conversation. No one person is the best at it all! Let me make it more simple, would you want your car engine fixed by your dentist? Or better yet, your teeth fixed by your auto repair person. I would hope not! Both are amazing at what they do best, because it is what they do day in and day out. And if your dentist can fix the car engine, well, one is the profession and the other is a hobby. There is a difference.

The article does ends well. "...As with any major financial decision, buyers need to educate themselves to a certain extent...", True, but I do not know what the author means by 'certain extent'. Everyone will want to know something different, as there are no two instances that are the same. So what should first time home buyers know - to what extent?

If I was in the market for a home, my very first one especially,  I would want to have someone in my corner that can advise me on what would work for me, my family and my future. As I mentioned above, for most of us this is the largest purchase we will make in our lifetime. Since we are talking mortgage, I would want someone that is licensed and lives and breathes this business, not just their 9-5, 5 day a week commitment. I would want someone that would say, "You know that is not my area of expertise, but I can refer you to someone that it is theirs!". Those of us that have been in the industry for quite some time have lots of contacts that we routinely use to help our clients with the Big Financial Picture, because we know that finances are not only about your mortgage.  We have Realtor partners, Insurance Partners, Investment Partners - so that we can help our clients with the whole financial picture. Banks are not the only ones with the corner on this market, the difference is, as a mortgage broker with referral sources, we are not cemented to deal with only one institution, because all financial pictures come in a kaleidoscope of colors. 

Plus if you are wanting a First Time Home Buyers Guide, to help you with information, let me know - I can forward one to your inbox today!  

Blog Post was written Referring to: https://beta.theglobeandmail.com/report-on-business/mortgage-seekers-wonder-broker-or-bank/article34786155/?ref=http%3A%2F%2Fwww.theglobeandmail.com&service=mobile

Happily Ever After Does Not Always Happen....

Splitting up, Separating and Divorce ..... now what happens? This can be a hard, confusing and emotional time for most people. Questions in your head spinning outta control, with the "what if's" piling up and weighing you down..... How does one partner keep the home? Can you keep it? How does one partner get paid out from the home? What can we do with all this joint debt? Can we pay out debt? If I am getting alimony can I use that as income? Does child support count? What if I do not have a job?  What if I am paying alimony and or child support, how does that affect how I can get a home? .... the questions can just keep on spinning and piling up!

Now more than ever you need some experts in your corner and a licensed mortgage broker would be the best solution for your mortgage questions. And breath easy there are solutions, but we need to make sure all the right things are in place first. When I am talking to one or both of the parties involved in a divorce or separation the first question I tend to get asked is, "How do I keep the house?" and then followed by,  "How do I then get my own house?" ... so lets start there.

Good News! Genworth & CMHC do have "Spousal Buyout Programs", however really they are treated as an extended purchase mortgages; so a few things have to be in place. We can go back up to 95% loan to value of the appraised home amount, so that could potentially allow for a few things to happen. (1) Debt to be paid out (2) money to be given to the one not keeping the home (3) the one party actually keeping the home. To do this, yes the one keeping the property does have to qualify on their own to carry the new mortgage (regular insurer guidelines for income to debt ratios) and what will also be requires is a separation agreement, appraisal and a purchase contract to be able to complete.

But lots of things can come into play especially with a separation and or divorce for that mortgage application (whether you are the one wanting to keep the house or get your own). Like joint debts, child support and or alimony, job status etc etc.....

Does alimony and or child support count as income? Yes, however it needs to be listed in the Separation Agreement and we usually need to see a 3 month of it being received into your bank account. I have had some woman that were the homemakers so they are going into the divorce with no income except the alimony their ex spouse is paying. These are harder situations to work with but not impossible. For these a strong cosigner is required especially if there is no job coming in the near future.

How does it affect my home purchase if I am the one paying alimony and or child support? You would have to qualify for your new purchase, whether that is using the insured or conventional guidelines. In the application, child support is added as a debt being paid, where as alimony can be either added as a debt or just deducted from current income. Usually the later is the best way to do the application for qualification purposes.

Can we pay out some joint debt with this Spousal Buy Out? Yes, if it is listed in the Separation Agreement. However the insurer can still decline some of these pay outs on a case by case basis - that being said, most listed in the separation agreement are indeed paid out if there is money to do so.

Do I have to have a Separation or Divorce document? Yes, and it has to be completed via a lawyer or a notary. Most times I am doing these types of transactions with the Separation Agreement as actual Divorce documents take more time to complete.

With Stats Canada telling us that from 2001-2005 the Canadian numbers are 70,601 for divorce this is something that everyone should know about for available options when in this situation. Most people know to speak to a lawyer about these matters but most do not know to speak to a licensed mortgage professional, so that you can have your housing options figured out as well. Which is a big deal! Where you will live, or continue to live, kids etc etc... if you are going through this right now I can help you solve your mortgage questions and issues. That way you can take some of the questions out of the process and you can sleep better at night.

Call or email me today, and lets get your options on the table! 

The Sun Still Came Out....

So the sun still came out today, Oct 17^th, 2016 even with the new Mortgage Rules coming into affect. What shocked me more today is the amount of Albertans that did not know it was coming… it is all I have seen in my news feed. But that is probably more due to the fact that I am in the industry than anything else. In that same breath, I have been posting about it since the announcement on Oct 3ed, 2016.  We have all been to caught up in the US Election & the information for the new Carbon pricing,  is my first thought, and totally understandable.

Lets do a bit of a recap for what came into affect today; the 5 year Bank of Canada Rate is now going to be used to qualify all high ratio insured mortgages. In simple terms; your mortgage currently will have to qualify at 4.64%, even thought your actual payments will be based on an interest rate much less than that. Our Government is calling it a "Stress Test" for all high ratio mortgages. I understand where this will cause some stress to Homebuyers in our Alberta market, as it has just significantly reduced their buying power, in some cases by 20%. However lets take a step back here, and hold onto your hats, as I am sure this is not going to be the opinion from a majority of brokers. 

I remember one of my first mortgages being at 6.25% and then another at 5.25% and I remember thinking at the time, those were awesome rates! Average discounted rates (taken from Dec of each year) is about 4.09% in the last 14 years and that is due to some record low rates starting about 2012, when the Bank of Montreal first announced their 2.99% rate. At the time it was an all time low for 5 year fixed mortgages and everyone was happy including myself – it made it easier to qualify for a mortgage. This was on the tails of the Government announcing changes in the amortization for high ratio mortgages from 30 down to 25 as well as changes to the TDS/GDS (total debt and gross debt) service ratios allowed when qualifying the mortgage.  It allowed people to still get into homes, and in my opinion, the banks to showed the government that they did not control how they chose to lend or at what rate. As this was also on the tail of the 2011 announcement in regards to Home Equity Lines of Credit and Credit card min payments, how they were used to qualify on the high ratio mortgages.

Do you remember the 2010 announcements? We had to change how mortgages qualified then as well. The Variable rates and the 1-4 year fixed rate mortgages, all had to change to use the Bank of Canada rate to qualify, which if memory serves was at 6.10% at the time. Currently for those same 1-4 year fixed rates and variable mortgages we qualify at current BOC rate of 4.64%.

Did any of this stop the housing market? Short answer no. The world kept spinning and people kept buying and selling. The worry for high ratio mortgages being qualified at 2.39% for 5 years is what happens to “Mr and Mrs Homeowner” after the 5 year mark, if rates do increase. In Alberta for sure there have not been a lot of significant increases to wage for families, and with this new Carbon Tax seems like the bills will just be getting larger. So what happens if that mortgage payment starts to get to high at renewal? The Government cannot control how the banks lend their own money (which I have heard suggested several times), which is the power of big business, ie Credit Cards and lines of credit etc … but they can control their own Government money backed insurance plans. And we have been seeing this heavy hand since 2008 with the loss of the 100% financing and 40 year amortizations.

My issues stems from how it was released and some of the reasoning behind the changes announced. The largest being that it needs to stop a National Housing Crisis (ie Vancouver and Toronto markets), when Canada does not have a National Housing Market. The housing markets from Vancouver to Alberta, and Saskatchewan to Ontario are so vastly different they cannot even be spoken about in the same sentence. What is good for the goose is not what is good for the gander in this case.  Changes that have already been made to those inflated markets and there is already some slow down; Vancouver has noticed a decrease and maybe that tax should have been added to the Toronto market before these other changes were implemented. Or that we all should have had more time to assimilate the changes – not just 14 days. Ramming change down the populations throat is not the best way to help smooth out a problem, in my opinion. Besides the fact that Government backed insurance has been a huge coffer increase to the government, since the default rates are actually not very high.

We can debate all day long how it should have been done or not have been done. But it is done and houses will still be bought and sold and mortgages will still be in place. Now more than ever I think that Homebuyers need the advice and guidance of a professional licensed mortgage broker – it is what we are here for.  Consumers need to know they still have options, and not just the doom and gloom being spoken about on the news. As licensed mortgage agents, we will always have options for our clients.... it is what we do... it is what we are good at.... we will continue to be the sun rising every morning for our clients and for our industry. Its what we do!

If you have questions or concerns please I am always here to answer.

Ariana Leroux

Licensed Mortgage Broker

DLC Brokers for Life 

780.952.4087

arianaleroux@gmail.com

New and Improved Website Coming Soon... and some updates! :)

I am so happy to announce that I will be having a new website I am designing! What a learning curve I can tell you - I had someone plug in the theme to use and help with some charts and pictures but I am happy to say I have been the one to put it mostly together!

I think however I will stick to Mortgage Building vs Web Building! lol, I am way better at the former than the latter that is true. Speaking of mortgages, as you already know the Bank of Canada has already left the overnight rate as is... so what does that mean for you? The lenders are still offering stable rates with nothing really going up to high or down to low... rates have been pretty consistant. The thing that has not remained steady are mortgage products. Most lenders have now all followed suit in regards to using a 3% payment caculation on all unsecured lines of credit and credit cards vs using the provable payment. This makes things I find tight for First Time Buyers when looking at what they qualify for. For example a $10,000 line of credit costs about $25/month where as now to qualify for the mortgage I have to use a $300 payment to qualify...see the difference? For larger unsecured line and credit cards this changes the playing field quite a lot. I am also seeing a change for my first time investment clients, with changing an owner occupied property into a rental property - as the prior 80% offset for rental monies has dropped to 50% with a majority of lenders - unless you are declaring it on your T1 Generals. When if so, the 80% stands as a usable off set.

Where I am seeing lenders step up is in the offers for Transfer/Switch mortgages, and covering a lot of the standard fees that come part and parcel of moving your mortgage! So you are able to get a great rate, great mortgage product (even moving the dreaded Collateral Charged Mortgage), and cost you nothing in transfer costs to the new lender upon renewal! Saving a few $100 or even $1000 can be helpful especially when everything else seems to be going up in price. But more so it is a great way to not feel married to your bank anymore! You do not have to have a messy divorce now to be able to unshackle yourself from your current lender at renewal time!

RCMP Musical Ride - Kids for Cancer Charity Event

So this was the 2ed event of the summer for "Your Mortgage Guides"! 

The RCMP Ride was amazing to watch! It was held at Amberlea Meadows, which is just outside of the SW of Edmonton. The turn out was amazing to support the Kids with Cancer, of which Amberlea Meadows is a huge supporter.

I have to take a moment to say, that Amberlea Meadows holds a place in my heart as I spend a lot of my childhood there. It is a wonderfully beautiful place and the owners have huge hearts - and it shows in the grounds, animals and all that they do.

For this event we set up a table and gear.... and started to answer any and all mortgage questions for everyone there. Truthfully spent a lot of time speaking to the RCMP officers which was pretty neat and watching them move their horses in the actual "ride" was astonishing! The place was standing room only!

 We added our pennies together, along with help from TMG (St. Albert Office) and donated a total of $375.00, towards The Kids with Cancer Foundation.

We even had a little photo bomber ... but she was cute, so it was totally ok!