Author: Team Vertuity

Is your Mortgage up for Renewal this Year?

Posted on by Team Vertuity

Here are some tips to ensure the process goes smoothly and you get the best rate available(that suits your own financial situation).

 

Start Early: We have a system that reminds clients 6 months, 3 months and 1 month in advance via email about an upcoming renewal. We also try to followup with a phone call in case the email is lost. Even with that in place we are see people wait until the last minute to contact us. By starting to talk about things 6+ months out we can ensure you will get the lowest rate available as many lenders will allow us to ‘lock-in’ a rate 120 days at a time. Since COVID, most lenders are understaffed so a renewal can normally take 4 weeks from start to finish, sometimes longer! There are ways we can help clients at the last minute but it may mean taking an OPEN term with your current lender at a higher rate which can be unnecessary. Start Early and Save More!

 

Fixed vs Variable: In our history in the mortgage business we have never seen the BoC increase rates the way they have over the last year. This means Variable and Short term rates are actually HIGHER than Long Term rates. The thinking is rates will come down in the near future, but keep in mind by taking a Variable right now you are paying a premium to ‘bet’ that rates will come down vs locking into a longer term(3/4/5yr) rate that is some times up to 1% lower. While rates may come down and this theory could work out, Variable rates may not be the best option right now. For some clients the standard 5yr fixed still provides security and comfort in knowing what payment you will have for the future, while also being the LOWEST rate currently available. However, for clients looking at shorter terms we are seeing some good options on 3yrs which will give some security but also not lock a borrower in for too long. A 5 minute conversation can give you a snapshot on what the market is doing and the best options available.

 

Is it worth it to change lenders?: We start the renewal process with an update of your financial scenario and then can provide mortgage rate options via a quick phone call or email. We then compare what your current lender can/has offered with what is available elsewhere to decide if it’s worth taking the next step. While every scenario is unique, we usually like to see a 25bps/.25% savings to ensure your time spent transferring to a new lender results in $$$ back into your pocket. Should your current lender match/come close to the rates offered in the market, simply renew with them knowing you have the best rate available and are keeping money in your families pocket. A few minutes is all it takes to ensure your new mortgage is fair and competitive.

 

Banks are sneaky: We are always being asked by clients if they should renew early? The Banks like to call clients 6-12 months in advance right now and claim they will do you a ‘favor’ and lock you early before rates increase. Don’t fall for this trick! Most people will be in a much lower rate currently than what you can obtain today, so by locking in early you lose the old lower rate and start sooner with a new higher rate. If it’s happened to you, learn from it for the next time your mortgage renews. Make sure you contact Vertuity and use our simplified process to ensure you get the best rate available for your future renewal while keeping your low current rate as long as possible. AND, if you know of anyone who hasn’t used us before, feel free to pass on our contact info. We would be happy to help any of our clients friends and relatives with their mortgage needs!

 

Call us at 204.888.4663 or Email info@vertuity.ca

CMHC has some concerns with the Winnipeg Housing Market

Posted on by Team Vertuity

After returning from our annual Mortgage conference and hearing positive reports from the big banks, mono-line lenders and other leaders in the our industry the outlook for next year appeared to be looking good.  After reading CMHC’s fourth quarter housing outlook it may be that Winnipeg will have a few bumps in the road to deal with.

Here are CMHC’s comments from their latest housing report for Winnipeg:

“Winnipeg: Moderate degree of vulnerability A moderate degree of overbuilding was detected as the inventory of completed and unsold units increased to elevated levels in the second quarter of 2018. Overvaluation continued to be assessed as moderate. While real disposable income decreased, there was an increase in the population aged 25 to 34 years and growth is easing for some house price measures. According to the HMA decision rule, a high degree of overall vulnerability should be indicated when both overvaluation and overbuilding factors exhibit evidence of imbalances. However, Winnipeg’s overall assessment was adjusted to moderate in this quarter as evidence of overvaluation and overbuilding observed is marginal.”

Looking at the full report closer it is CMHC’s opinion that the local market is moderately overvalued and has a high inventory of new homes.  It’s not as doom and gloom as other markets in Canada but there appears to be some concerns.  With all the changes made to lending guidelines it wouldn’t be shocking to see local prices level out and stay flat for the next few years.  That said, the real estate market in Winnipeg has been historically stable and is still affordable for most so slight increases for certain price ranges may also be expected.

As 2018 winds down we enter our slow season so the next few months won’t be telling, but it will be something to watch in Spring 2019 to see what this means for real estate prices moving forward.

Mortgage Broker vs Banks?

Posted on by Team Vertuity

An interesting article from the Toronto Star this past week talking about the benefits of working with a Mortgage broker or a bank.

https://www.thestar.com/life/advice/2018/07/31/mortgage-brokers-vs-banks-the-pros-and-cons.html

As a mortgage brokerage we are a bit biased in that our service is a good one and many of our clients in Winnipeg feel the same way.

We are constantly asked what is better fixed or variable and our answer is that everyones situation is different.  While one family may like the peace of mind a fixed rate offers another may find the premium paid for that security too much and opt for the lower variable rate instead.  And they both made the right answer because it was one that was best for their own situation.

The same applies for the Broker vs Bank debate.  If you are happy with the service you are getting from your bank or Credit Union and are confident their rate/product is competitive and fits your needs then you are likely making a choice that works for you.  If you would like a variety of options and rate, whether its to ensure you have a good offer from your current lender or you are looking to have a mortgage somewhere else a broker can help.  If unbiased opinions from someone who is not an employee of the lender then a broker would be a good fit. With either decision you make it comes down to what who are most comfortable with and what option works best for you.  And if you keep that in mind when you are deciding on a provider for your next mortgage you should be fine!

January 1 is fast approaching, do you know how the new changes may affect you?

Posted on by Team Vertuity

In October, OSFI implemented 3 new mortgage rule changes starting January 1, 2018.  Here are the changes and what it means for buyers and homeowners.

1) Qualifying Rate Stress Test for all uninsured mortgages

Uninsured mortgage consumers must now qualify using a new minimum qualifying rate. The rate will be the greater of the five-year benchmark rate published by the Bank of Canada OR the lender contractual mortgage rate +2.0%.

How does this affect the mortgage consumer?  The biggest impact will be on the amount for which the home buyer/owner will be able to qualify. Previously, the home buyer/owner qualified at the contract rate offered by the lender. While the actual mortgage payment will still be paid at the contract rate, a higher calculation will be used for qualification purposes.  This means approximately 20% less purchasing power.  It will also affects current mortgage holders looking to refinance or transfer who will now need to qualify at the higher rate.

2) Lenders will be required to enhance their loan-to-value (LTV) measurement in certain areas

Mortgage lenders (excluding credit unions and private lenders) must establish and adhere to appropriate LTV ratio limits that are reflective of risk and updated as housing markets and the economic environment evolve.

How does this affect the mortgage consumer?  OSFI directs lenders (excluding credit unions and private lenders) to have internal risk management protocols in higher priced markets like Toronto and Vancouver. This is a continuation of a policy already in place. Many mortgage lenders have been following the principles of the policy already and it affects regional markets differently.  Currently this policy does not have an affect on our local market.

3) Restrictions will be placed on certain lending arrangements that are designed to avoid LTV limits

Mortgage lenders (excluding credit unions and private lenders) are prohibited from arranging with another lender: a mortgage, or a combination of a mortgage and other lending products, in any form that circumvents the lenders maximum LTV ratio.

How does this affect the mortgage consumer?  Right now many Alternative lenders policy will only allow them to lender to certain LTV maximums.  They bundle the remaining amount with secondary lenders to get clients to a desired LTV which is no longer allowed.  This will mean less options for non-prime borrowers moving forward.

 

There is no longer one solution/rate for everyone.   These changes made in the last 2 years can affect each borrower differently.  Now, more than ever clients will need to rely on their mortgage brokers for guidance as we navigate through this ever changing mortgage lending space.

More changes to come as Mortgage rates are about to increase?

Posted on by Team Vertuity

With mortgage rates appearing to be on the rise this week borrowers may be faced with more challenges than just higher interest costs in the future.

It seems the new Government is not done with their changes nor are they looking to get any input from industry experts.  After Mortgage Professionals Canada lobbying in Ottawa this Spring the Canadian Mortgage Brokers Association is also trying to get the Liberals to listen to reason. http://www.mortgagebrokernews.ca/news/industry-association-pens-letter-to-osfi-230336.aspx

The CMBA hope is for the Government to wait and see how the changes last fall have fully impacted Canadians before they make any further changes.   And also address some of the issues they have caused, mainly rate increases to good borrowers who have 20% equity or more in their Home.  This type of borrower has seen their interest rates to be .25% higher than CMHC insured borrowers all while the Big Banks have recently posted record profits thanks in part to these new rules.  There are also suggestions on the new ‘stress test’ and how it could be applied to certain uninsured borrowers.

With the recent proposed Tax changes to small businesses and the mortgage changes to average Canadian borrowers one wonders who this new Government is actually looking out for?

 

Your Mortgage Broker Is the Specialist You Need

Posted on by Team Vertuity

Your mortgage broker is the specialist in the mortgage industry.  Unlike banks, mortgages are the only thing a mortgage broker sells.  There are no other products that need to be learned.  It’s mortgages.

Banks typically offer higher mortgage rates than the rates that are available. You need to negotiate with a bank to try and obtain a better loan rate.

A mortgage broker, like Vertuity Mortgage, has access to a large network of lenders to find the specialized mortgage to meet a customer’s needs. The mortgage broker can get the better mortgage rates from more than one lender. The mortgage broker does the homework and shops on behalf of the client.  Unlike the bank, the mortgage broker isn’t limited.

Vertuity Mortgage, for example, has access to over 40 different lenders. They will typically work with 5 to 10 lenders that have the products to meet their client’s needs.  Vertuity Mortgage provides an impartial opinion about the different products and isn’t obligated to a particular lender. Vertuity Mortgage works for the client’s benefit.

Bank loan officers have in-house mortgage products they need to sell. The in-house products often have strict conditions around the mortgage that need to be met.  A bank can only offer the limited range of products they offer.  Unlike the banks, the mortgage broker has access to many different lenders with many different products. Options aren’t limited. The mortgage broker is the specialist.

As a specialist, the mortgage broker also makes the time to understand the mortgage process and its governmental rule changes. Housing markets are dynamic and processes and procedures for obtaining mortgages change.  Rules passed by the government in the fall of 2016 are greatly affecting the housing market in 2017.  The mortgage broker learns the rules changes and understands how the changes affect the customer.  It’s not just a matter of securing a mortgage initially.  It’s also a matter of securing a mortgage that’s affordable in the long term.

The best part about working with a specialist like a mortgage broker is the fee.  There isn’t one. Mortgage brokers work on 100% commission and are paid by the lender when a mortgage is completed. A lender’s payment to a mortgage broker could be a flat finder’s fee or a percentage of the mortgage value paid as a commission. The commission may be based on the size of the loan that includes the term of the loan. The mortgage broker is the specialist and works on commission from the lender.

Home buyers are best served by the specialist who can put the time into finding the right mortgage. It’s not just about the mortgage rate.  The right mortgage makes all the difference. Mortgage brokers are the specialists who deliver the right mortgage at the best rate.

Do First-Time Home Buyers Work with a Bank or a Mortgage Broker?

Posted on by Team Vertuity

A dilemma first-time home buyers when trying to secure a mortgage is whether to work with a bank or a mortgage broker.

Today, the issue is compounded by overheated housing markets with skyrocketing prices and government rule changes designed to dampen the housing market.

In the fall of 2016, the government pass new laws requiring home buyers to show they can afford to make payments if interest payments rise.  The mortgage stress test uses the Bank of Canada’s mortgage rate as a barometer. Some home buyers that would qualify for a particular mortgage before the stringent stress test now have to settle for a lower mortgage.

Other rules changes in previous years have tightened lending and made qualifying for a mortgage more difficult. First-time home buyers face significant challenges with down payment amounts, income requirements and affordability.

Who’s better suited to help the first-time home buyer in today’s market?

First-time home buyers may initially feel more comfortable going to a bank.  Banks are where people go to get loans after all.  Canada’s big banks push hard to win over new mortgage customers.  However, this year the big banks have come under heavy scrutiny for the way they sell new customers.

In March of 2017, the CBC News program Go Public published a story about employees from all five big banks in Canada saying they feel pressured to meet unrealistic sales targets. To meet sales targets, many employees use sales pressure, tricks and even lies to close new deals.  Go Public said it has received nearly 1,000 emails from employees from RBC, BMO, CIBC, TD, and Scotiabank locations across Canada describing high pressure sales tactics used on customers.

Go Public also sited a report by the Small Investor Protection Association that 96% of the 121,000 people registered as financial professionals in Canada are registered as dealing representatives.  Dealing representatives are sales people licensed to sell financial investments. They don’t have a legal obligation to act in a client’s best interest.  They are paid to sell.

Banks sell lots of different products in addition to mortgages.  They don’t specialize in mortgages. High sales quotas require bankers to sell lots of products.

A mortgage broker, like Vertuity Mortgage, specializes in mortgages.  It’s all mortgage brokers do.  The first-time home buyer is better served by a specialist in mortgages.  The specialist can take the time to really understand the housing market.

The government rule changes require a significant investment of time and effort to understand and put into affect.  Even more taxing is understanding the effect the government rules have on buyers. The mortgage broker learns the rules inside and out and understand how it affects the home buyer.  The mortgage broker can shift and adjust mortgage strategies to not only secure a mortgage for the client but make it the right mortgage at the best rate.

Contact Vertuity Mortgage to talk to a mortgage specialist about your home purchase.

The Mortgage Stress Test Is Changing First-Time Home Buyer Strategies

Posted on by Team Vertuity

First-time home buyer strategies in Winnipeg need to change because of the mortgage stress test and rising home prices.

In the fall of 2016, Ottawa implemented the mortgage stress test to ensure home buyers can meet mortgage payment obligations if interest rates rise. If you require an insured mortgage, you must qualify for payments based on the Bank of Canada qualifying rate for a five-year fixed-rate mortgage. The rate currently stands at 4.64%.

There can be a considerable gap between what you must qualify for and what you actually pay.  The Bank of Canada rate is currently 4.64% and a competitive mortgage rate is approximately 2.28%.

Potential home buyers need a strategy to work with the new guidelines imposed by the government. Vertuity Mortgage works with clients to understand the mortgage stress test. “As a mortgage broker, we’re able to help people understand the mortgage stress test and how it affects the purchase price of a new home,” said Brent Parnell, owner of Vertuity Mortgage.

Determine What You Can Afford Ahead of Time

Parnell said potential home buyers need to determine how much home they can afford. He said the average home price is around $300,000 in Winnipeg. First-time home buyer strategies need to be different when home prices climb.

“If you put ten percent down with a good interest rate your payment is going to be around $1,500 a month,” said Parnell.  “You need to look at where you’re buying and how much home you’re buying for that monthly payment.” Parnell said some of the contributors to the price of a home are the location, when the home was built, the size of the home and the size of the lot.

“We prequalify our clients for a mortgage and help set their expectations about the home they can buy.  The mortgage stress test puts pressure on the purchase price of a home and potential buyers need to understand it. First-time home buyer strategies need to change,” he said.

Parnell said first-time home buyers need to spend more time early in the home buying process to learn what affects the price of a home. First-time home buyers need to find a balance between the home they want and how much they can afford.

Some of the options are:

  1. Find an affordable neighborhood that meets your needs.
  2. Decide how many bedrooms and bathrooms you really need.
  3. Be realistic about the age of home you want to buy. How new does your new home need to be?
  4. How much yard do you need? Can you get away with a smaller lot?
  5. How much is your down payment? Can you save more and come to the table with a larger down payment?
  6. How do you earn more money to afford more home?

Vertuity Mortgage will walk you through the home buying process and help you understand all the variables affecting home prices.  Vertuity Mortgage will work with you to understand how much home you can afford.

 

Soft First-time Winnipeg Home Buyer Sales in April 2017

Posted on by Team Vertuity

Soft first-time Winnipeg home buyer sales in April 2017 are the reason Winnipeg home sales were down 5% from April 2016, according to the WinnipegREALTORS® Association.

Unit sales in April 2017 of 1,300 were down 5% from a record April in 2016. For residential-detached properties under $300,000 there was a 15% decrease in sales activity in comparison to last April. WinnipegREALTORS® identified the new stress test on insured mortgages and its impact on buyer qualification as the primary concern.

The Canada Mortgage and Housing Corp. says the annual pace of new housing starts fell 15 per cent in April 2017 compared with March 2017. The seasonally adjusted annual rate of housing starts was 214,098 units in April, down from 252,305 in March.

In the fall of 2016, new housing regulations expanded stress tests making it harder for nearly 20% of new home buyers to qualify for mortgages. A more stringent mortgage stress test was put in place to ensure Winnipeg home buyers can afford mortgage payments should the interest rates rise.

Vertuity Mortgage quickly adjusted to the new qualification requirements and prepares buyers for the new stress tests. Winnipeg home buyers are having to change their expectations on a case-by-case basis. Some home buyers still qualify for the homes they want while others have to lower their goals for a new home due to the new affordability guidelines.

The first-time Winnipeg home buyer has expectations on what he or she wants to buy.  But when they find out how much they can afford, they may be forced to make some difficult decisions. Other payments and expenses may have to be reduced or eliminated to afford a new home. New car purchases and vacations will be put off in favor of the new mortgage.

Vertuity Mortgage reviews the qualifying requirements with each potential Winnipeg home buyer. Each client has a unique situation and the new affordability guidelines affect each client differently. The mortgage rule changes affect nearly every potential borrower.

Vertuity Mortgage works with a broad base of lenders to find the right mortgage based on each customer’s needs. Vertuity Mortgage assesses each Winnipeg home buyer on a case-by-case need to make sure qualifications are met. Rules changes mean the process is more complicated and harder to understand. Vertuity Mortgage takes care of the hard work so the client can focus on finding the right home.

WinnipegREALTORS® is a professional association representing over 1,875 real estate brokers, salespeople, appraisers, and financial members active in the Greater Winnipeg Area real estate market.

The Mortgage Stress Test Is Affecting Winnipeg Home Buyers

Posted on by Team Vertuity

The mortgage stress test is having a powerful effect on new home buyers in Winnipeg.

The mortgage stress test is a required mortgage calculation ensuring you can afford your mortgage payments should interest rates rise. If you require an insured mortgage, you must qualify for payments based on the Bank of Canada qualifying rate for a five-year fixed-rate mortgage. The rate currently stands at 4.64%.

There can be a considerable gap between what you must qualify for and what you actually pay.  The Bank of Canada rate is currently 4.64% and a competitive mortgage rate is 2.28% according to ratespy.com.

Unknowing buyers see the actual competitive rates and go out and buy a home.  Unfortunately, a lot of them won’t qualify for financing based on the mortgage stress test.

It’s not easy to buy the right home today.  The average house price in Canada as of February 2017 is $551,400 according to the Canadian Real Estate Association. Some markets, such as Vancouver and Toronto, are fiercely hot.  Inventories are low and competition is very high.  Bidding wars break out over the smallest of lots.

Of course, not all markets are as hot as Vancouver and Toronto. However, markets are still competitive.  When you actually hit the pavement to shop for a new home you need to be prepared.  You need to understand what you qualify for and what you really want to purchase.

In Winnipeg, the value of an average home is $298,329. The mortgage stress test still has to be applied.  It’s a matter of being prepared and knowing the mortgage you qualify for and what you want to buy.

Your mortgage gap could be significant. According to the Financial Post, for a federally backed loan on a house worth $551,400, your actual monthly payment based on a 25-year amortization at 2.28 percent would be $2,278.35.  However, you have to qualify for a mortgage payment of $2,925.74. The nearly $700 a month difference is what’s causing a lot of problems.

When Vertuity Mortgage prequalifies clients for a mortgage, we explain the mortgage stress test.  We look at the amount you want to spend on a home and we determine ahead of time if you can pass the mortgage stress test implemented by Ottawa.  We discuss the payment amounts of what the mortgage stress test says you have to qualify for and your payment amounts at a competitive mortgage rate.

Vertuity Mortgage has a No Hassle process to walk you through the steps of buying a new home.  We work through the rigors of the mortgage stress test so you understand today’s mortgage process.