HOUSING MARKET LOW RISK TO ECONOMY SAYS BoC
Canada’s housing market despite its hot spots, is not a significant risk to the economy
due to regulation of mortgage lending says The Bank of Canada.
BoC also stated “House prices have been rising relative to household income for about
20 years and driving forces have included a shift towards urban living, growing
population - including migration - lower interest rates and improving credit conditions”.
The tighter lending conditions have also improved credit worthiness of borrowers, with
average credit scores rising. Canadians have been paying down their mortgages and
mortgage default is extremely low.
This is our reality folks, so stop believing the spin doctors pushing the ‘Negative’ button
for their benefit. I refer to the Banks perpetual ‘Rates are going to Rise Soon’ and the
media sensationalizing overheated markets...’The Sky is Going To Fall’ type of language
designed to sell more papers, magazines etc.
The economy continues to be weak. Some say it’s in Recession. Inflation is so low that
there is fear of the opposite, Deflation.
As we walk the streets of Centre Wellington we notice that there are few For Sale Signs
and noticeably so. It’s a great time to buy a first home, to move up, to trade down and to
build that dream home with rates as low as they were half a century ago.
It’s also a great time to build your wealth by acquiring a second (rental) property and to
renovate your existing home.
Aside from Toronto, Vancouver and Calgary the overall housing market is stable and is
expected to continue to produce price growth.
We are CW’s number one source of mortgage financing. Give us a call today to discuss
your needs and remember DO NOT RENEW WITHOUT TALKING TO US FIRST!
You won’t get a recording or press 1, 2, 3 for whatever. We answer our phones ‘Live’
and that’s just the beginning of our friendly, professional service to our neighbours.

WHAT EVER HAPPENED TO ‘TRUTH IN LENDING?’
Truth in lending in the mortgage industry used to be based on straight forward terms
and conditions included in documents that one could easily understand.
We never hear of this term anymore and in fact a very opposite reality has become the
norm.
For this reason, getting a (bank) mortgage today has in effect, become a minefield of
potential hurt when one or two payments are missed.
The new bank mortgage product called Collateral Mortgages literally give the banks the
power to seize your house even when you may never miss a mortgage payment. Hard
to believe isn’t it?
As independent professional mortgage brokers, our job is to help you avoid this
minefield to the best of our ability, and to find you a mortgage solution which is fair and
equitable. In contrast with the banks, we go to great pains to inform and advise you as
much as possible to fully understand the mortgage documents you are signing.
In short we make every effort to protect your interests, and our service is free OAC.
Our last two articles in this paper cited many specifics about collateral mortgages of
which you need to be aware of.
Please take the time to review, discuss and share these articles with those you know.
Better yet go to our blog at: PriceTeamMortgages.ca and copy them for future reference
the next time your mortgage matures, or you are ready to buy your next home.
We are passionate about getting the truth out to the masses such that there becomes
are more general widespread awareness about the nature of Bank Collateral
Mortgages.
Whenever we are asked what the differences are between us and the banks, we feel
like ‘A Kid In A Candy Store’ because we are excited to provide a host of powerful
reasons (and examples) why they can benefit by choosing us over the banks.
Think of us as your independent mortgage ‘Ombudsman’ here to protect and guide you.
Getting a mortgage through our friendly caring team is a whole different experience than
what you are accustomed to. We love our business and we take as much time as
necessary to make you feel appreciated and comfortable with your new mortgage.
For your next mortgage need, please give us a call.

‘BUYER BEWARE’ HAS NEVER BEEN SO IMPORTANT
Continuing from last week’s article where we pointed out that when you get a bank
collateral mortgage these days, you have no choice but to take it, and you do so
completely uninformed because you essentially agree to terms and conditions that YOU
ARE IN FACT NEVER MADE AWARE OF.
How can this be true you ask? Well, because the basic mortgage commitment you sign
excludes all the really important terms and conditions that are buried in a voluminous
document called STANDARD CHARGE TERMS that are sent to the lawyer days before
closing, and which you never get any reasonable chance of reading yourself.
How dangerous is this? Mortgage lending (from Big Banks) has evolved to the point
now where BUYER BEWARE NO LONGER APPLIES, that is in a practical sense
because you have little or no opportunity to understand what you are signing.
In law however the Buyer Beware doctrines still require you to be fully ‘aware’ of what
you sign and so you do not have a leg to stand on.
Let’s look at a few clauses taken from actual Bank Standard Charge Terms
documentation.
We’ll start with the CIBC. Clause 5.2 Entitled ‘Demand to repay the total debt’ states
“...we will apply any money we receive to reduce the debt anyway we see fit.” Clause
5.6 states “We may require you to pay the total debt immediately if one of the following
events occurs > you do not make any payment as required by this mortgage or any
agreement.” also > you do not meet your obligations under this mortgage or any
agreement.” By the way ‘any agreement’ refers to any other credit cards, loans, lines of
credit etc you have with your bank. Together these two clauses give the bank the right
to call your mortgage in default as soon as you miss payments on any other credit/debt
you have with them. Hypothetically, you could continue to make all your mortgage
payments on time, and the bank can apply part of your mortgage payment towards any
missed payments on other debt, and technically render the mortgage in arrears and/or
default.
Here is one (very scary) example of what can happen that was in the news last year. A
father cosigned for his daughter’s new credit card (with RBC) who went to university,
maxed out the card, never made a payment (never told her dad and failed out) and her
father received (without warning) a POWER OF SALE NOTICE on his house from the
bank because of his daughter’s irresponsibility, nothing more. He had banked with RBC
for over 30 years. It didn’t count. And it didn’t matter that he had done no wrong. This is
but one example of how callous the banks can be.
When a payment is missed the banks (all have similar terms) can begin to charge you
‘the highest interest’ at their discretion. Let’s look at SCOTIA’s clause 26. Guarantee.
>...”It is understood that we can without obtaining the consent of or giving notice to any
guarantor: Increase the rate of interest payable under the Agreements either during the
initial term or any subsequent renewal period.” No parameters are given as to what
interest rate can be charged in our view, nor does this clause mention default.
Looking at TD Banks clause 2.06 Costs. >”All costs incurred by the Bank will be
immediately payable by you, bear Interest at the highest interest rate and form part of
the debt” you owe.
In a nutshell, we believe that bank mortgages have become downright dangerous and
given the fact that you are not informed to any meaningful degree, so that you have a
reasonable comprehension of your new obligations, they should be avoided at all costs.
Folks our job is to inform, advise and protect you to the best of our professional ability.
We hope that for your next mortgage need you will call us first because we have many
lenders who do not even have such a mortgage product. We will keep you safe and put
you in a good ole fashion ‘friendly’ standard mortgage.

‘SMOKE AND MIRRORS’ BANK MORTGAGES
When you get a mortgage from a bank today, if they told you that your unsecured credit
cards, loans, line of credit, in other words every credit facility you have with them would
become secured under the new mortgage, would you agree to this?
If they told you they were going to register the amount of mortgage up to125% higher
than the value despite the funds you receive, thus rendering you with what appears to
be no equity, would you be OK with that?
Also if someone at the bank explained to you the penalty you would pay if something
went wrong, God forbid, like job loss, separation/divorce etc., which no one expects will
happen, when in fact they happen all the time, and you realize that the penalty is both
shocking and grossly unfair, would you proceed with such a mortgage?
Clearly your answer would be NO, NO AND NO!!! I’ll find a mortgage elsewhere.
The problem is that such disclosures of information are rarely given by the banks. You
show up a the lawyer’s office, and while he or she may do their best to inform you of
some of the perils of this new style ‘COLLATERAL MORTGAGE’ it is simply too late.
Costs have been incurred and your money has already been spent. It is too late to start
over, especially if you bought a house which must close and so you proceed and the
transaction closes.
We are of the opinion that these new bank mortgage products give the bank virtual
control over you, financially speaking. You see, if you now miss one credit card or loan
payment you are considered in default OF EVERY DEBT you have with your bank. In
fact, if one misses even one credit card payment for example (and are falling behind
and in trouble) the bank can now act to take your house too. This was never the case
before.
Please understand that when you obtain a bank mortgage today, you are agreeing to
many new ‘Dangerous to your Health’ terms that you don’t even see in the mortgage
commitment that you sign. Can this be true? Yes it absolutely is, because every
borrower is obligated by the STANDARD CHARGE TERMS which you sign at the law
office the day before closing giving you little to no chance to read. This is the FINE
PRINT that we keep warning you about that can harm you more than you can ever
imagine.
Next week, we will continue this subject with specific quotations directly from various
Bank Standard Charge Terms documents, that will make you cringe.
Yes borrowing from the Banks has utterly become a game of SMOKE AND MIRRORS.
We are here to protect you the consumer. We can only hope that you will call us first for
you next mortgage need.

YOUR MORTGAGE PENALTY WAS HOW MUCH?
Years ago mortgage penalties were straight forward. Penalties were calculated on the
greater of three months interest or interest rate differential (IRD).
This is far from the case today. In fact it is utterly confusing, complicated and dangerous
because every bank seems to have their own formula. This is because there is no
required uniform formula which must be followed thus allowing the banks the ability to
take advantage of the borrower, while at the same time giving little or no ‘Disclosure’
either. What a shame. No, what a travesty.
Our current reality shows that penalty calculations have been manipulated such that
rarely is the penalty just three months interest. You guessed it. They have found a way
to charge the IRD, the ‘greater of’ most of the time.
The IRD penalty is based on 3 things.
1. The principle balance at the time you break it.
2. The ‘difference’ in the ‘contract’ rate of the original mortgage and the rate the bank
charges for the term closest to the time remaining on the mortgage. For instance if
there are 22 months remaining the bank will most likely charge based on a 2 year
term ‘comparison’ rate.
3. The number of months remaining on the mortgage term.
If the bank uses the ‘discount’ off the ‘posted’ rate, it widens the difference with the
‘comparison’ rate. This increases the IRD calculation which inevitably becomes the
‘greater’ of the two versus ‘three months interest only’.
Here’s an example of a 5 year fixed rate mortgage. Mortgage amount $300,000.
Contract rate 2.69%. Discount1.95% from a Posted rate of 4.64% giving a Comparison
rate 3.04%. Months remaining on term: 22. Differential is 1.6%. Penalty is $8,800.
Confusing isn’t it? Contract rate; Posted rate; Comparison rate are all used to confuse,
and here’s the ruse. The so called ‘Posted’ rate is in truth an illusory rate because all
lenders are looking to recover ‘lost interest’ when they reinvest the monies for the last
22 months of term in this example.
In fact penalty calculations should only be based on the differential between the contract
rate and the actual reinvestment rate = lost interest. If that were the case three months
interest only of $2,750. would apply. That’s a savings of $6,050. Most of our lenders use
this latter formula.
We are here to protect you from lending practices that will hurt you.
More coming on this subject next week.

We have new clients currently late on a bi-weekly mortgage.  We cannot get them a prime mortgage.  It’s truly disheartening but if your mortgage is not up to date, you are technically in default and no other mortgage company will consider you as a prime deal or best rates. 

Since the beginning of this year, mortgage payment history has become part of the credit report.  So now all lenders, credit card companies and financial institutions can see how you have paid your mortgage for the past 7 years.  Many homeowners are under the wrong assumption that is no big deal to miss a payment especially if they are paying twice or four times a month.    We are opposed to most homeowners paying their mortgages more than once a month.  On bi-weekly payments, you have twice the chance of a missed payment showing up on your bureau and with weekly payments, that’s four times.    Remember the increase in frequency on mortgages is in the bank’s favour and not yours.  They can use your money to lend out and charge you interest while they do.  YOU DO NOT PAY YOUR MORTGAGE DOWN ANY FASTER unless you are on accellerated payments.  But the risk far outweighs any advantages.  The biggest risk for you as the homeowner is a bank exercise power of sale proceedings on three missed payments and that can be only three on weekly payments. 

It is much more prudent to increase your monthly payment by your prepayment options or just put a lump sum when you can.  Most of our lenders allow 15 to 25% in prepayments.   That way, you are in control and not your bank!

If you have had some late payments in the past, do not worry.  Switch your payments back to monthly and start paying on time.  And don’t forget to call us anytime.  We are here to help.

Just a few observations as former and new clients call who are up for renewal this year.  Some institutions are being a little deceptive.   Homeowners are getting notified by mail stating they must sign their renewal letter because their mortgage has matured.  It is usually a drop dead date of two weeks.  But when you look at the actual mortgage statement the mortgage matures much later. Don’t be rushed into signing your mortgage renewal. 

Ideally, the best time to start looking at your mortgage is about 6 months before maturity.    Do yourself a favour and make an appointment with us to discuss your options.  Renewals offered by your current institution will always be higher than what we can get for you.  And lenders bank on you simply signing it back so you pay them higher interest.

 Often simply renewing does not make sense especially if you are carrying high cost debt.  Mortgages are not simple anymore and banks and mortgage lenders are putting new language in some commitments so it is difficult to get out of them ever or you pay dearly if you happen to sell during the term.  We have had homeowners sign for no frills mortgage which has an attractive low rate but comes with punitive penalties.

 If you are retiring in the next few years you definitely should being having a discussion with us.  Remember if you are carrying a mortgage into retirement there are options for long term mortgages with 30 to 35 year amortizations, so you still have a life beyond your mortgage obligation.

As mortgage brokers we deal with 47 different lenders including the major bank, credit union and mortgage lenders.  Because we are high volume mortgage producers, we are offered the best rates and terms in Canada.  But besides that we offer great advice, the advice we give our own children.  

If in the end, you really just want to switch your mortgage to a new lender, we will organize that for you at no cost.

Mortgages are all we do and we are very good at it.

SPRING CLEANING YOUR HOUSE – WHY NOT YOUR FINANCES?

The proverbial spring cleaning season is upon us. While you are at it cleaning the house, the garage, the yard, the cars and sprucing up the gardens, it’s also a good time to declutter. Get rid of (sell on Kijiji) old furniture, bicycles you no longer use and stuff you simply no longer need. In other words, simplify!

While you are at it, why not get your financial house in order by looking for ways to save money. Scan your bank statements for recurring costs like memberships or subscriptions that you don’t really need and should probably cancel anyway. Cash in any accumulated rewards, whether it’s points or miles or  gift cards have left over from Christmas. Gift cards can even be sold for cash via websites. Eliminate any fee credit cards for no fee, same with your bank accounts. Review your various insurances and bundle if you can with one provider to reduce premiums. Home phone lines and cable tv are becoming passe`. Perhaps it’s time to eliminate one or both? Big savings here!

Track your expenses to better understand where you spend money (lunch, dinner eating out, same with weekend breakfast out) and cut back wherever you can. Try using cash instead of a debit card. Reliance of debit card use enables us to overspend where we otherwise would not and if we allocated so much cash per week/per month to spend, and when it’s gone, no more spending.

Cut a vice. Maybe that pint after work with the guys or quick smoke with the girls outside at lunch is a necessary stress relieving break, but maybe it’s just an expensive habit that needs to be broken. A few cigarettes a day can set you back $520 a year. A pack a day costs $3,650. Just think of how this money can be so much better spent.

If you are having trouble saving, these examples of things you can do to lower expenses will produce some savings. It’s not too late to start saving ten percent of every paycheck, or  realize the equivalent via new found expense reduction/savings.

And by all means make sure you are not carrying monthly credit card debt. Review your credit report once a year…we can help you with this and provide you with several debt reduction techniques to save you significant interest payments.

Want to eliminate a line of credit but don’t see how? Call us for a financial spring tuneup and a free comprehensive analysis of your debts and mortgage. 

As our moniker says “We don’t just do mortgages, We change lives” for the better. We are not only mortgage professionals, we are ‘financial counsellors’ who love to help people reduce/eliminate the financial and otherwise improve their lifestyles.

The TD  bank has been caught, ‘with their pants down’ once again.  This time CBC’s Marketplace went undercover last week  to see how transparent it was about collateral mortgages and the fine print associated with them.  According to the segment TD earned failing grades.

We were the first brokers to warn clients and our readers about the pitfalls of these mortgages when they were introduced by the TD and other banks as well.   For a refresher, the banks are now registering a mortgage at 125% of the value of your home.   It doesn’t matter what you owe but that amount is a lien against your property.  

The biggest problem we see, is when a collateral mortgage combines the unsecured debt like a credit card,  line of credit and car loans.  If a mortgagor defaults on their unsecured debt, the bank can exercise  power of sale.  So in other words, unsecured debt becomes secured in the far reaching powers of the bank.  

We have seen the fall out from this product where homeowners just about lose their homes after falling behind on a visa card or a line of credit.  This is just way too much power in the hands of the banks.   And not disclosing this to clients is really reprehensible.  The feds late last year ordered banks to provide full disclosure to their clients about collateral mortgages but it’s clear there are those who are not.  

The problem with these mortgages as well is they are not transferrable.  In other words, you cannot transfer them to another lender without cost.   This now requires a lawyer to discharge the collateral mortgage and the client must pay to leave.   We see this as handcuffing the client by not allowing them to shop their mortgage for the best rate and terms. What happens when a bank know you can’t go any where else for a new mortgage without incurring costs.  They won’t be competitive because they know they have your business.   In contrast, a normal mortgage based on the amount borrowed alone can be switched to a new lender with no cost to the homeowner. We do these all the time.

And of course, what happens if a client wants to tap into their equity and the bank who has the collateral mortgage says  NO.   Now the client is forced into a penalty just to access their own equity with another lender.  

Collateral mortgages are good for the bank’s retention and that is what they are after, holding on to you and your paycheque for life.  But we think it’s not in the favour of the homeowner and can even set them up for disaster if any unforeseen circumstances happen.