18 Oct


Latest News

Posted by: John Panagakos


October 2016 the Ministry of Finance passed rules which are still having effect one year later. Higher qualification and new bank capital requirements have split the industry into two segments.  Those who qualify for mortgage insurance and those who don’t.

Mortgages that qualify for mortgage insurance are basically new purchases for borrows who have less than 20% down and qualify at the Bank of Canada Benchmark rate.  The current benchmark rate is 4.89%.  Clients who don’t qualify for mortgage insurance are basically everyone else.  People with more than 20% down payment and people who have built up more than 20% equity in their homes, don’t qualify for mortgage insurance.  It will be clients such as these which will be impacted by the mortgage rule changes coming.

The biggest difference we are seeing is two levels of rate offerings. People who qualify for mortgage insurance by one of the three insurers in Canada (CMHC, Genworth and Canada Guaranty) are being offered the best rates on the market. People who don’t qualify, cost the banks more to offer mortgages due to the new capital requirements and are offered a higher rate to off-set that cost.

But even more alarming, rumblings about another round of mortgage rule changes coming.   People who have been disciplined in saving or building equity will need to qualify at 2.00% higher than what they receive from their lender.

In the first round of changes in 2016 we saw affordability cut by about 20% for insured mortgages.  This new round of changes will have much the same impact on the rest of mortgage borrowers.

The mortgage default rate in Canada is less than 1/3 of a percent. We Canadians simply make our mortgage payments. So where’s the risk?

These new qualification rules are intended to protect us from higher rates when our current terms come to an end.

***This ariticle was written by Kristin Woolard part of DLC National bassed in Port Coquitlam, B.C.

The impact of mortgage rule changes coming  January 1, 2018 will be felt by everyone.   My word of advice to anyone contemplating a refinance to meet current goals or planning on purchasing?  Contact me today to find out what your best options are before your window of opportunity is closed.


12 Oct

Time To Lock In Your Rate? Make Sure You Have An Exit Strategy

Mortgage Tips

Posted by: John Panagakos


Like many of you, I received a call last week, from my mortgage provider, asking whether I wanted to “lock in” a new five-year fixed rate. The rate was a special offer and would only last for the week, so I would need to make a decision quickly, with little time to think about the consequences to my own mortgage strategy.

While it may appear that your financial institution is acting entirely in your best interests, this is only partially the case. While it is true that locking in or switching to a new fixed rate can help you control your costs, they are doing it to manage their own costs, not yours. It’s important to remember that each time a financial institution lends you money, it’s not their own money. Their strategy is to borrow the money from investors, depositors and other corporations in order to lend you the money. The five year fixed rate renewal they sign with you is backed up with a five year investment contract with someone else. Always.

When I started as a broker, the best piece of advice I got was from a former boss who said; “Before you sign up with someone, its always important to have an exit strategy, because things will change, often for the better, and you may need to get out of the agreement. Make sure you make it easy to do so. “

Having an exit strategy is just as important when signing a renewal or early renewal contract. The strategy is not so much about exiting the mortgage entirely, but ensuring you know and can use the existing features to your advantage. There are three specific features (termed ‘privileges’ and ‘penalties’ in the offer) that you should know and understand before signing that new contract;

A) Pre-Payment Privilege
For most of us, there is some time in our lives where a sum of money lands in our laps, perhaps a large bonus, severance, cash settlement or even a small inheritance. Knowing how much you can pay down, should you choose to, is vital. Depending on the lender, you may be limited to a 10 percent prepayment or as much as 20 percent. Some lenders specify the exact day you can make the prepayment, some merely say ‘anytime’.

B) Increased Payment Privilege
Again, at some time in our lives, most of us will leave one job for another that pays significantly more. In those situations we can certainly afford to increase our mortgage payments and should do. Do you know how much you can increase your payment and when? Again, it varies widely from lender to lender, for 10% on a specific day, yearly, to 20% anytime.

C) Early Payout Penalty
This is perhaps the most ignored potential cost in mortgage financing. As with the privileges, no two lenders calculate the penalty the same way. Its important to understand the differences. It can save you thousands.

Most people’s reaction, when we talk about penalties is ‘well I’m never going to pay out early, so it doesn’t matter. ‘ I don’t blame you for thinking that way, because that’s always my reaction too! But let’s walk through a “what if” and I’ll show you why its important to consider.

So… You have an existing mortgage in the amount of $480,000. Your lender’s representative calls you to say that because rates are going up, he’s calling all his clients to let them know that if you wish to early renew, they’re offering a fixed rate that’s actually a minuscule amount lower than you are paying now. Rates are going up and the offer is only guaranteed until the end of the week!

Because it’s actually well before the renewal date, there is a penalty, but they’ll add that on to the mortgage balance, no need to worry. After a couple of moments hesitation, you agree and you go in to sign at the branch. Overall, your experience with the lender has been very good.

Spool forward three years and your life is changing. You’ve become an expert in your field, people are noticing and suddenly, you are offered a dream job in another part of the country.

It’s sad and exciting to have to sell up and move but you’re startled when you realize the payout penalty is $21,000. That’s a LOT of your hard earned equity to lose but you realize that you’ve already actually paid another $37,00 in penalties when you renewed early. Now its $25,000! GULP!

I know you realize that this is a worst case scenario but it can potentially happen to any one of us. The key is not avoiding these costs, but by making informed choices, avoid paying any more than you have to. By being aware and making one simple change, your penalties in our previous scenario could be about $7,500 – a savings of $17,500.

***This article was written by Jonathan Barlow part of DLC A Better Way in Surrey, BC.***

If you’re thinking of locking in your mortgage give me a call. We will sit down and take a look at the best possible solution based on your personal situation and possibly saving you thousands of dollars. As your mortgage broker I am here to get you on the right path to financial freedom. Your business and your referrals are much appreciated, so please feel free to share my contact information with friends and any family members who may need help or advice with the financing of their home.

Thank You,
John Panagakos