Vancouver mortgage rates

Rates On The Rise Again!

The Royal Bank announced that effective tomorrow they are raising all rates by 0.25%. As an example their posted 5 year fixed rate would rise to 6.10%. This increase is on top of ones that took effect last week that were up to 60 bps.

So far no other major lenders have matched these increases but I expect them to follow suit shortly.

Wayne Mah, Senior Mortgage Planner, The Mortgage Centre 604.880.1899 / mah.w@mortgagecentre.com

Vancouver mortgage rates

Financing A Property Purchase in Canada From Overseas

For many years now people have been purchasing properties in Canada as a second home or as an investment in large numbers. With the recent Winter Olympics just over, the number of enquiries on how to finance such a purchase has exploded.

I am going to go over this here. Please note that there are more favorable rules for our American purchasers which I will detail here Financing For Americans Purchasing A Property In Canada

As it is difficult to easily verify income and credit for buyers from other countries most mortgage lenders in Canada will not finance these types of purchases. Generally only a few of the mainstream banks will provide these types of loans.

So how much can you get?

The main rule of thumb is 65% of the value of the property. I would caution that if you want to buy a property over $1 million in value that it is highly UNLIKELY that you will get 65%. Most lenders will apply a “sliding scale” to larger loans to reduce their risks on higher end properties. A typical example of a “sliding scale” would be to use a formula such as “75% of the first $500,000 and 50% for the reminder of the value of the property” to determine the maximum loan they would be inclined to do. This is the same for Canadians so no they are not making a special rule just for non-residents!

What documentation is needed?

1. We always begin with an application that must be completed disclosing fully your income from abroad, assets and liabilities.
2. As previously indicated income verification is quite difficult as documentation varies widely from country to country. Therefore, in most cases this is waived or not a requirement. This is why the loan percentage is lower.
3. A satisfactory bank reference letter will be required. This would be a signed and dated letter from the bank you mainly deal with from your home country stating how long you have been a customer along with comments on how you have used credit in the past.
4. A three month history of your bank account would be required to confirm your downpayment. Anti-money laundering laws are very stringent in Canada so the three month history would be used to view any “unusually large and irregular deposits”.
5. A Canadian bank account must be opened from where the mortgage payments can be automatically withdrawn from. You can do this after the mortgage is approved.

That is it!!!

Extra tip:

I generally don’t like to push one particular bank/lender as each applicant has different needs. However, for non-resident purchasers I do suggest that if you are in a country with HSBC Banks to see if you can become a “Premier’ client with them. HSBC is one of the lenders in Canada doing mortgages for non-residents and as a “Premier” client with them it has been my experiece that we can get higher loan amounts and things are simplified somewhat as the underwriters here in Canada can contact your branch wherever it is in the world.

Please note that the above is a general guideline and each application may result in additional criteria being required.

As always your comments or questions are welcome.

Wayne Mah, Senior Mortgage Planner, The Mortgage Centre 604.880.1899 / mah.w@mortgagecentre.com

Vancouver mortgage rates

Big rate increase announced

The Royal Bank of Canada led the way today and increased their posted mortgage rates on their 3, 4 and 5 year fixed rate terms. On the 5 year fixed rate term they increased it by a whopping 60 bps, going from 5.25% to 5.85%.

3 and 4 year terms were increased by 20 and 40 bps respectively.

These increases had been anticipated for quite some time now as the yields on the bonds had increased significantly over the past while biting into the profitability of their mortgages.

TD Bank later in the day matched these increases. We can expect the other lenders to follow suit shortly.

Vancouver mortgage rates

Great Variable Rate Mortgage Strategy

Despite the low fixed rate mortgages available there are still many people asking for variable rate products. Most of the time they ask what the best rate for a variable is. In majority of the cases this would be a variable rate closed mortgage. However, I have been suggesting they take the variable rate OPEN even though it comes with a slightly higher rate. Why? Well, in this video I explain the strategy and the reasoning behind it. This ultimately may get you a better deal and save you money.

UPDATED March 15, 2010: Since the recording of the video on March 3, 2010, variable rate closed mortgages are now as low as Prime less 0.50%.

Vancouver mortgage rates

BC Budget Homeowner Changes

The British Columbia introduced the new Provincial budget on March 2, 2010 and it included some minor changes/benefits for homeowners. They are as follows:

1. Rural BC (outside Lower Mainland, Fraser Valley, and Capital Regional Districts) residents get an extra $200 off in addition to the normal homeowners grant for their property taxes.

2. Families with children under the age of 18 can now defer their property taxes.

There are some requirements for the tax deferal and you can view them here.

What are your thoughts? Particularly on the tax deferment plan?

Wayne Mah, Senior Mortgage Planner, The Mortgage Centre 604.880.1899 / mah.w@mortgagecentre.com

Vancouver mortgage rates

Posted 5 Year Rate Confirmed As New Qualifying Rate

It has now been confirmed that the new qualifying rate, effective April 19, 2010, for all CMHC insured mortgages will be as follows:

  The greater of the chartered bank’s posted 5 year term rate or the contract rate.

This will apply to all variable rate mortgages and for fixed rate terms under 5 years.

We were all waiting to find out what the new qualifying rate would be ever since the Federal Finance Department announced changes back on February 16, 2010.

As of today the qualifying rate would be 5.39%.

This is a significant setback to borrowers and to many non-bank lenders. For all borrowers this will mean that they will be qualifying for much less money post April 19 compared to now. To many non-bank lenders, who have been qualifying many of their applicants on discounted 3-year fixed rates currently for variable rate products, this will level the playing field with their bank competitors. It may have an impact on their bottom line as this current policy had given them edge in attracting would be borrowers who needed just a bit more money.

As an illustration on the impact, below is the amount a borrower can get using three different scenarios. In all of them I am using an income of $60,000 per annum, a 25 year amortization, the assumption of no other debts, a 32% GDSR and a figure of $2500 per annum for property tax and heat.

1. One non-bank lender today is using 3.65% as a qualifying rate for their variable rate mortgages. $274,000
2. Using today’s 5 year fixed discounted rate from many lenders of 3.79%. $270,000
3. After April 19, 2010 assuming the qualifying rate is today’s bank posted 5 year rate of 5.39%. $230,000

A client in this example would be able to borrow $40,000 LESS going with a variable rate product after April 19, 2010 compared to today.

Although this has only been announced by CMHC, I anticipate other insurers (Genworth, AIG) to follow this government set mandate as well.

If current mortgage volumes are any indication, we will see a continued surge in clients attempting to finalize their mortgages prior to the new rules implementation.

As always your comments and feedback are welcome.

Wayne Mah, Senior Mortgage Planner, The Mortgage Centre 604.880.1899 / mah.w@mortgagecentre.com

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