Recent statistics show that Canadians are choosing mortgage brokers instead of the banks, much more often these days, and that is a good thing for the consumer. Read on, and find out ‘Why’Our overall industry market share in 2000 was 17%, in 2008 it was 25%. Today it has grown to 38% representing approximately 4 of every 10 mortgages, with 44% of First Time Buyers opting to choose a mortgage broker first. It is predicted that our industry will have a 50%+ market share versus the powerful Canadian banks in the next 5 years or so.

This trend is the result of the consumer recognizing the value of the mortgage services of a mortgage broker, particularly giving them much greater choice of mortgage products and generally lower rates than the banks. The internet has also become a big factor as well in our growth, in that more and more people research the internet first before deciding on the source of mortgage financing, and with some 20,000 independent mortgage consultants offering their services across the country. So the choice of choosing a mortgage consultant versus one of the big 5 banks, is huge.

Why should you support our industry and choose a mortgage broker as opposed to your bank? Well, frankly, we could write a book on this subject, suffice to say that, if our industry were to be decimated as it was in Australia with the credit crunch in the past two or so years, mortgage brokers all but disappeared and ‘guess what’, the 4 big Australian banks jacked up interest rates, and profits soared because they no longer had any competition from ‘non bank’ lenders whom the consumer could only access via mortgage brokers. All the banks hiked their rates, believe it or not, ‘simultaneously’, claiming at the same time, that there was no ‘monopoly-like’ power. Could/would such few banks ever act together for their own benefit in this country? Well, Yes. We weren’t borne ‘yesterday’ were we?

So the moral of this story, dear readers, is that, because of our industry, there is considerable competition in the mortgage marketplace. And this is healthy very healthy. Without us there would not be any ‘non bank lenders’ for us to send your business to, to get you a better ‘deal’ and financial ‘solution’. Our ‘beloved banks’ would have a virtual monopoly.  Hence our ‘great’ Canadian banks would have a ‘hey dey’ and their profits(which are already insane)ould soar to the heavens without a doubt.

Case in point: Check out this rate comparison.

 Bank Rates                                                                      Our Rates

 1 Year Open    6.7%                                                          6.49%

  6 Mths Closed 4.45%                                                         3.95%

   1 Year Closed  3.35%                                                        2.44%

    2 Year Closed  3.60                                                           2.89%

    3 Year Closed 4.25%                                                         2.90%

     4 Year Closed 5.19%                                                         3.54%

      5 Year Closed  5.44%                                                       3.49%   WOW

      7 Year Closed  6.09%                                                        4.75     WOW

      10 Year Closed 6.40                                                           5.15%  WOW          

      5 Year Variable 2.75%                                                         2.3%   WOW

       You might be interested to know, that we also do business with the big banks, and when we do, we often get better rates from our client’s banmks, After, they have approached them first, and are not satisfied with the rate, terms, or service, they come to us.

For your next mortgage please call, ‘THE PRICE TEAM’ first for all your mortgage needs!         

It started innocently enough, my 26 year old son asked me for his credit card statements. I saw him on the phone and asked him who he was talking with. He told me it was a company who could reduce his credit card debt. Now my son is a university student, does not own a home and has some student loans and some credit card debt. He has perfect credit. Of course, a program which could help relieve his debt load was alluring and he was sucked in. Horrified, I immediately told my son to hang up the phone. Well of course, with a prospective sale now in the dumper, the debt specialist asked to speak to me. That was a big mistake because I told him his so called debt program was ruining people’s lives. He went on about foreclosures in the US and how his program helped people with big debt load, adding my son with no income could not afford these high interest credit card payments. I think that’s when I asked him how he could sleep at night knowing the financial harm he causes his clients and I added some other choice words.

You see these debt reduction ads splashed over the TV, radio and print. And now they are telemarketing, trying to find new victims. They are relentless, calling several times a day with messages like call us, ‘if you would like us to negotiate lower rates on your cresit cards’. They promise to reduce your credit card rates and get you into more affordable payments. These debt programs are a ‘ruse’. What they don’t tell you is that it will take years for your credit to rebound because the program destroys your credit. They don’t tell you that the reduced monthly payment you agreed to make is paying their commission for years. They don’t tell you, you have to pay the large commission in full if you want to get out of this program.  They don’t tell you that no lender will look at you for a mortgage while you are in this program. And they don’t tell you that you will have to pay that commission off completely which will amount to thousands over 3 to 5 years and still must re-establish good credit for 2 more years before any lender will even consider you for the good mortgage. That’s a minimum of 7 years with someone like myself coaching them what to do.

We know so many people whose lives have been ruined by these slick ‘debt cousellors’. We had one client with perfect credit but when her husband lost his job, she got scared and believed these people were going to help her. She cried when I told her what they had done to her credit and how we would have to wait until this debt was repaid before any prime institution would look at her application. My son, could easily have been an unknowing victim had I not been here. The debt program would have ruined his credit card rating and he would not have been able to buy a house for years. He will repay his credit card debt when he finds a job as an electrical engineer. I still don’t know how these ‘debt counsellors’ sleep at night! Warn everyone you know about them especially your grown kids.

While we pride ourselves with having a ‘squeaky-clean’ financial image and a more conservative approach to life than our American neighbours, it seems that we have been on the same slippery ‘subprime’ mortgage slope after all, albeit on a much smaller scale.

Between 2005 and 2008 a dozen or more subprime(B) lenders, the most prominent being Xceed Mortgage, GMAC and Wells Fargo(all lenders from the U.S.A. who came here) took an aggressive approach to mortgage lending, up to 100% of sale price, plus(in some cases) legal costs, charging fees and higher than normal interest rates.

Today these lenders have disappeared because of the ‘credit crunch’, and these mortgages are now coming due. All the borrowers’ have/are/will be told that their mortgages will not be renewed and will need to scramble to find a new lender. The task will not be easy, as most were either self employed, had poor/bad credit at the time, or both. Experts believe that the vast majority will not find a new lender, and will default on their mortgages, causing a flood of power of sale properties. Some will have improved credit, and will qualify. But because loan to value ratios were so high back then, and lending guidelines have tightened up since then, many will not have sufficient equity to be able to qualify for a new (replacement) mortgage.

It is estimated that there are approximately 30,000 such ‘orphan’ mortgages coming due this year and next, which represents about 5% of the total mortgage market. If you are one of these unfortunate people, call us as soon as possible to review your situation with you, especially if you want to remain in your present home. We will see what we can do for you, and as a last resort we may be able to arrange a ‘Rent to Own’ solution, that is, have an investor purchase the property from you and rent it back to you. We will credit ‘coach’ you, and will assist you in improving your credit to qualify to repurchase your house in the future. This way, you will not default on your mortgage, damaging your credit beyond repair.

On October 18th TD Canda Trust launched a new type of mortgage that makes it easier for homeowners to tap into their equity. It is called a ‘Collateral’ mortgage charge which is registered at 125% of the home’s value. In other words let’s say your home is valued at 300,000 and you only borrow $150,000: the mortgage is registered on tityle at $375,000.

We should point out that several banks are starting to use the collateral mortgage product, but on a more selective basis, not across the board as in the case of TD Canada Trust.

To the uninformed, the collateral(CM) mortgage may seem like a good idea, however the reaction from our industry has been very negative, as it has from home media sources as well. the CM has as its primary security, a promisary note as ‘back up’ or collateral security. It allows for a re-advancing of the principal, like a revolving line of credit does. On the surface, it sounds good making it “EASIER’ new credit in future, and you don’t have to go anywhere else right? While true, the fact is you ‘CANNOT’ go anywhere else(to another lender) without incuring significant costs to get out of this mortgage, and you cannot ‘switch’ your mortgage to another mortgage lender, because lenders in general do not ‘accept’ collateral charges of any sort from other institutions.

The truth of the matter is that with the CM, the bank has ‘significantly greater’ control over your future ability to access credit, be it a mortgage, a loan, line of credit, and potentially new credit cards as well. You see, with what loks like a $375,000 mortgage registered on title, it appears that you have zero equity. It is more expensive to register a ‘Collateral Mortgage Charge’ than a ‘normal’ mortgage, and it is more expensive to discharge it as well, and you pay for this, not the bank. Secondly, what you may or may not be tolds that you cannot register a second mortgage, ever, and there is also fine print that ‘allows’ the bank to increase the rate of interest they charge you(at their discretion of course) up to ‘PRIME PLUS 10%. That’s right! Which would be 13%(on your secured mortgage) based on today’s prime. Critics point out that with this action of ‘juicing’ up the rate that the banks can require from you in the future,(at the bank’s sole discretion, without your ‘permission’) that this is similar to that of credit card companies doubling or tripling the interest rate charged on a credit card when the client is late on ‘MAKING A PAYMENT’ twice in the same year. So if you sign for one of these (CM) mortgages, God help you if you ever run into trouble, i.e. job loss etc., because your mortgage interest/payments can skyrocket, and if that were to happen, you would likely to be forced into default, with the bank making excessive profit at your expense. We should also remind you of the actions some banks took during the ‘credit crisis’ last year, when they ‘upped’ the interest rate(arbitrarily we should add) by one per cent on lines of credit, to all credit holders. Why? To help their profit margins. Fortunately, many consumers simply left, cancelling their LOC and went to another institution. Leaving your CM will not be nearly as easy.

So we ask, can the banks arbitrarily increase the rate on the new CM a person has signed, withoutm that person doing anything wrong? Well it certainly looks that way, and if so that is downright scary.

With common knowledge that the banks characteristically send out renewal notices, close to the maturity dates, offering less than best rates, and leaving existing clients with little time to shop elsewhere, the new CM product appears to give the banks an even better opportunity to charge higher renewal rates since it is both more ‘expensive’ to switch to another institution, and it is also more ‘difficult’ to do so. We have serious concerns about such a CM product. It gives the banks powers that go well beyond that of a traditional mortgage. We are concerned that the borrower may not fully understand the ‘downside’ aspects(or be aware of them at all), and that by the time they get to their lawyer’s office to sign, everything is done and ready to close, so it is too late to start over. Also cheaper ‘in house’ bank closing services when used especially in the case of new CM’s will leave the borrower without any ‘independent legal advice’ whatsoever, and that is really scary.

From our viewpoint, it would appear the client’s ‘options’ are in fact ‘diminished’ rather than ‘enhanced’ as the bank may want the consumer to believe. Quite clearly, with a CM, the consumer’s choice is limited, and some may think also anti-competitive, since a CM in our opinion, increases the borrower’s exposure to potentially significant and catastrophic loss.

Almost every time we get a First Time Buyer(FTB) mortgage client that has applied to the bank for their first mortgage, we learn that the bank was trying to charge them a higher interest rate etc.

First timers lack any knowledge and experience when it comes to understanding all the facets of the real estate process, and yet the majority of parents and real estate agents continue to send the ‘kids’ to their friendly banker. We expect this is the case because trust in the banks ‘is still ingrained in most of us’

This reality continues to befuddle us, as the FTB is one of our ‘specialties’ We love helping young people starting out, to attain that first place they will call home. And we have a lot of experience doing so. We take special care to educate them every step of the way, including helping them assemble all the key players(service providers) they will need, with the view to making their experience as cost effective, enjoyable and stress free as possible.

Most importantly, we take the time to explain each step of the way, giving them a proper understanding of the next step and proper expectations with respect to all subsequent steps. Too often FTB’s tell us that they are rushed at the bank, and were not informed about ‘so many’ things. And they do not know if the rate they are being offered, or the mortgage product and terms they are given are the best or not. The facts are that we, with our high mortgage volumes and multitude of lenders, can get them the same rate as we can get our wealthy clients, consistent with our policy to get each client the absolute best interest rate out there.

One example of ‘our advantage’ is that we understand that FTB’s do not have the ability to make(extra) prepayments to their mortgage, and so we get them a ‘no frills’ product with an even deeper discount, saving them more money.

Many prospective FTB’s are declined by the banks, often due to some small issue(s) that can be fixed. As a result, many FTB’s give up on their dream of home ownership and keep renting, not knowing that a professional mortgage broker likely has a solution.

Footnote: Activity in the real estate market has picked up considerably over this past month; we are busy again, realtors are busier, as are real estate lawyers. If you are thinking about making a move in the near future, don’t put it off(act now) & (deal with the financing first)because now is the time to purchase; it’s now a balanced market(flexible sellers) and mortgage rates once again have dipped to all time lows. In other words, housing may never be this affordable again.

An interesting statistic that just came out from Stats Canada is that Canadians move, on average, every 3.3 years. At first blush, this seems a lot of moving doesn’t it? Some people live in their very first  home until they retire, but this is the exception. Tracy and I bought in Fergus this past summer, and this will be our second move in 7 years. When I think back over my adult life, I have in fact moved 10 times in 35 years, having lived in Burlington for 14 years alone. So there you go, I moved every 3.5 years.

We have had a variable rate mortgage since 2003, which means I had a “fixed” rate mortgage for 8 out of 10 moves. This translates into breaking my mortgage AND PAYING A PENALTY 8 TIMES to the bank. That’s a lot of money paid to mortgage lenders during the term of my mortgages, and estimate that I paid in excess of $20,000, money that could have stayed in my pocket, had I had a variable rate mortgage all along. A recent study by York University states that based on data collected from 1950 to 2007, Canadians 90% of the time saved an average of $20,630 more on a variable rate mortgage vs. fixed rate, over 15 years for every $100,000 borrowed. So with a $200,000 mortgage the savings would be more like $40,000 +. Wow!

You see, when we move unexpectedly during the term of a fixed rate mortgage, we can get hit with the ‘Interest Rate Differential’ or IRD penalty which can be very significant. This is the difference between your contract rate and market rate for the remaining balance of your term. We have seen them in excess of $20,000, and in one instance, the people had already sold and bought ‘firm’ so they were stuck with a huge penalty. Fortunately they had the equity cushion to pay it, otherwise they would have been in jeopardy of completing their purchase and could have been sued.

Why pay a sizeable penalty when you don’t ‘have’ to on a fixed rate mortgage when you only need to pay 3 months interest(not 3 full payments) on a variable mortgage? Folks, most of us do not expect to move as much as we do. But ‘LIFE happens. People change jobs, get married, get divorced, move up, move down, get ill, get injured(losing mobility) and people die. AND we pay a hefty premium in order to have ‘peace of mind’ with a fixed rate mortgage.

The fact is, the banks prefer to sell fixed rate mortgages because they make more profit. whenever people cghoose a variable, the banks tell them to ‘FIX FIX FIX’ or ‘LOCK IN’ for fear of rates rising. isn’t it interesting that the banks always stick to this line, and isn’t it interesting that they, along with the media NEVER tell us that rates will go down. the banks motivation is to make more profit, end of sentence. We are here to save you money, to educate you and to guide you. and consider this. when you come to us first(before purchasing) to evaluate your situation and get you new financing, we always address to penalty issue. from our experience in this business, we have concluded that the vast majority of people do not give this any thought, and from what we have seen, it appears to be something the banks do not readily address either. this but one reason why our services can be invaluable.

Another new statistic reveals that 1 in 3 Canadians(33%) now choose mortgage brokers to get them the best solution. So as you can see, your choice of mortgage provider should involve much more than interest rate alone((even though we offer the best rates out there) but with mortgage ‘terms’ that can save you tens of thousands of dollars over the longer term. Part of the reason for the rapid growth in our industry, we belive, is also the fact that the consumer is more sophisticated than ever. Please call us for your next mortgage change, and experience the difference.

Restrictions contained in the the fine print of your mortgage could cost you thousands of dollars. Often these restrictions are contained in the fine print and often homeowners are not even aware of these restrictions until they find the need to break their mortgage. This is why it is so important to talk to the Price Team to make sure you are protected when it comes to the biggest investment of your lifetime. If you have obtained your mortgage directly from the bank, most if not all examples below have not been mentioned or explained to you. Since we look out for your best interests, we not only do our best to steer you away from lenders and mortgage products that are potentially onerous, but we explain any important ones to you.

Here are some examples…

Can’t break your mortgage before your term is up or in the 1st three years.

A penalty surcharge of 1% for mortgages broken in the first 12 to 36 months.

Re-investment fees on top of mortgage penalties.

Interest rate differential(IRD penalties based on an onerous bond yield calculation.

IRD penalties on variable rate mortgages(usually only apply on fixed)

IRD penalties based on the costly posted vs discounted rate fomula.

Inability to port unless purchase and sale take place on the exact same day(difficult to do)

No guaranteed rate discount if you switch from variable to fixed rate.

No refinances in the 1st year.

No fee switches for transfer eligible mortgages.

Amortization limits of 25yrs

minimum amortizations of 15 to 18 years.

Restrictions on converting from fixed to variable in 1st six months.

No ability to break open your equity line of credit without a penalty.

No prepayments within 30 days of discharge

Inability to port across provincial lines

High administration fees for, porting 100% clawback of cashback if mortgage is broken before maturity

Requirement of full banking relationship with the lender.

No lump sum pre-payment privileges

No annual payment increase

Pre-payments restricted to one day in the year

We think it’s time for the government to step in with regulations on IRD charges and full disclosure is needed for homeowners to understand. While no one intends to break a mortgage during the term, dramatic rate changes, divorce, sale of house, job transfers, finding a better home, sickness, injury, job loss, investment opportunity, and even bad neighbours can cause someone to decide to break their current mortgage. When you do, we’re here to help you get the best rate and mortgage terms possible.

Wouldn’t you rather have an expert mortgage broker be vigilantm on your behalf, than be in the dark, only to get a rude shock in future when you break your mortgage, because you arranged it yourself?

Quite frankly, it’s long overdue. Our mortgage industry has been pushing for years for banks to clearly define their penalties. Finally a few lenders are now putting their penalty clauses in their commitments but most have them contained in a 30 page mortgage charge which is given at the lawyer’s office(which clients never read) as the mortgage is closing.

The federal government in its wisdom will now make it mandatory for full disclosure for penalties.

We see it first hand because of the number of mortgages we handle from many different lenders. Lenders now can pretty much do what they want when lawyers asked for a discharge from the current mortgage. And there is no recourse. There are two penalties for paying out a mortgage early. One is the 3 month interest that applies if the new mortgage rates are higher than the existing or the IRD or interest rate differential. Simply put, it’s when rates go down the IRD goes up. Here’s how it works. First take the principal balance, multiply it by the difference between the previous high interest rate and divide by 12. Multiply that number by the remaining months on the mortgage term to get the approximate IRD payment owed. Banks do not even have to tell the client how the IRD was calculated in the first place so there is no way of telling if there was a mathematical mistake or not and so basically clients are at the mercy of the mortgage company they are exiting from.

The Financial Consumer Agency of Canada has receivede over 100 penalty related complaints since the beginning of the year and is investigating some of them. In many cases, the banks are going way too far because they are making their calculation on the basis of what was the posted rate was at time of the mortgage and not on any discounted rate that was agreed upon with the customer. Last week we had this happen to one of our clients. With only 12 months remaining on his mortgage the bank is charging him 5,000 dollars for breaking his mortgage. This is unfair and wrong and we urged our client to file a complaint.

This is one of the major benefits of a variable rate mortgage, the penalties are a simple 3 month interest so there are no games being played. The Feds are making changes so that banks are forthcoming about their penalties. Call us for the best mortgage advice and a free analysis of your mortgage situation. Our best 5 year fixed rate is 4.34%. Best variable 1.7%

Rose called after reading in one of our previous articles which stated that it would be better to call us about six months prior to mortgage renewal. We encourage our readers to call sooner rather than later so we can check credit, book the best rate, or help clients get ready for the maturity of their mortgages. Waiting until a few weeks before maturity is stressful and remember your bank is counting on you just signing it without doing any shopping. As a matter of fact, 80% of Canadians blindly sign that mortgage renewal which locks them into a much higher rate, costing them thousands extra.                                                                                                                

That’s why we like to start about six months prior to maturity, so we can do a full analysis of every client’s situation. And sometimes it makes sense to pay it out earlier rather than wait till maturity, as was this case.                                                                                                               

So we had a look at Rose’s financial situation and much to her amazement we were able to really transform her financial situation. We took her from a 6.1% mortgage on her Drayton property to a 2.2 % variable rate mortgage. In the meantime, we found a way to reduce her total monthly payments from 3500 per month in adsdition to paying off 11 credit cards totalling some 69,000. Credit card balances were high because she had significantly improved the house. Now she has one easy payment of less than $1000.

But that is only half of the story. We were able to remove her father who had co-signed for the mortgage four years ago and replace him with her new husband who was a former bankrupt. Her father was very pleased, and her new husband was legitimized financially and as we like to put it, ‘brought back from the dead’. What was even more shocking was the value of their home. The appraisal came in approximately $50,000 more than they both expected so all their hard work fixing up the house had also paid off. it was a win/win situation for Rose and her hubby. They will now take some of the interest savings and pay down their mortgage as quickly as possible now, saving them even more.

A footnote to this story is that their bank would not lend them the money to improve the house, so they had to rack up high interest(bad debt) credit cards instead, putting them under much financial pressure. They had approached their bank a year ago to see if they could increase their mortgage. The bank declined them.  We got it done, and now they are out of a hole, and their lives are moving forward, with ease.

Folks, most people have ‘circumstances’ and most mortgages have’wrinkles’ and the banks only want straight forward mortgages without ‘warts’. Don’t waste your time appraching your bank. Call us first. We’ll not only get you approved, we’ll get you a better rate, better mortgage product, and give you better service.

If you want expert advice to look at your situation, especially if you need a creative solution, please call us. Even if your situation is very straight forward, we will get you a better deal. We love helping people put their financial house in order and we are very good at what we do because we have extensive experience, and we care.

Pete called in a panic. He went out and bought a house based on his bank’s pre-approval. The Agreement of Purchase & Sale gave him 5 banking days to obtain financing, otherwise the deal becomes null and void if he does not waive the financing condition, thereby firming up the purchase. Not only did the bank end up saying NO, but they assured him that everything was fine leading him to waiving the financing condition. THEN after the purchase was firm, they turned around and said NO. Now he was in a position of being sued by the vendor if he could not close. This is why he was panicking and rightly so. His realtor then suggested he call us for help. Too bad we weren’t referred to in the first place and none of this would have happened.

You see folks, banks ‘so called’ pre-approvals(as the saying goes) are not worth the paper they are printed on. Reason being, is because the bank neither does a credit check or employment/income verification, and that is just looking for trouble. Yes there was an issue with his income, but we figured it out and got it done. We also got him a 3.74% 5 year fixed rate mortgage, and did not charge any fee or cost for our service. just think about how embarassing and frustrating it is to go out and buy a house based on a green light from the bank, to then have it all blow up.

When you get a pre-approval from us, you can rest assured that the only thing left to be approved is the property, not starting from scratch and doing what should have been done in the first place.

As for the banks, well, they all operate the same way, and it is down right unprofessional and dangerous. If you haven’t used our services before, isn’t it time you did.