Loan amount available: $25,000 - $250,000
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Getting access to cheap money in our current lending environment is not easy and lenders today often look for reasons not to do a deal. This can be very frustrating and can often lead to lengthy delays and expenses. With interest rates on the rise, it becomes even more important to consider your options. Below is a quick review of the many ways to borrow the funds you need and save money and time.
Prime rate mortgages: Banks, Credit Unions and Monolines dominate this category. All of these lenders can offer different rates at different times and it can often mean a difference of up to 70 basis points in the rate. This can make a huge difference in the cost of interest. Many of these lenders sell the benefits of their products, but at the end of the day, it money in your pocket that matters. Banks will never tell you about another lender’s rates; unless it’s worse than theirs, but mortgage brokers will do so. Prime rate mortgage have also become more complicated with the new lending rules. An insured mortgage, high ratio mortgage and conventional mortgages are all offered at different rates. It’s hard to believe, but someone buying a home with 10% down payment can secure a better rate than someone putting 35% down.
Line of credit mortgages: Currently the prime lending rate charged by most lenders is 3.70%. Your mortgage line of credit rate is set based on the prime rate and many clients are being charged as high at 4.70% (Prime plus 1%). Lines of credits can offer lots of great benefits, but when you compare this to a variable rate which is being offered as low as 2.70% and the rate savings is very obvious.
Alternative mortgages: These mortgages normally fall into two categories of Subprime and Private financing.
Rate update: The Bank of Canada will announce rates again on Sept 5th and they are expected to increase rates. Customers should now consider locking into a fixed rate.
On Wednesday the Bank of Canada raised its overnight rate by .25% and the banks have followed by increasing the prime lending rate to 3.70%. It now takes nearly 90% of pretax income to own a home in Greater Vancouver and the mortgage rate increases will only make it worse.
Lending remains very constrained and if your taxable income is less than $100k per annum, you will find it very difficult to purchase any type of property in Greater Vancouver with a prime rate mortgage. Higher interest rates, Increasing taxes and the high cost of property does not bode well for the real estate market. June sales decreased almost 38% over the same period last year. Buyers now have more choice with a 40% increase in the amount of properties listed for sale compared to same period last year. I believe it is time to be cautious with spending and refrain from listing your home for sale unless you need to sell it.
Although the prime lending rate has increased to 3.70%, mortgage rates are still attractive. Some lenders are offering Variable rates as low as 2.70% and a 5 year fixed at 3.34%. Did you know that you now can get a variable rate mortgage with an option of ‘interest only’ monthly payments?
It appears the new mortgage rules introduced at the beginning of the year is having the intended impact on housing. Last month home sales have declined by over twenty seven percent and listings have increased by near the same amount from same month last year. CMHC also says the annual pace of housing starts in April was lower compared to the previous month. “The seasonally adjusted annual rate of new home construction, which is seen as a measure of the health of the housing market, fell to 214,379 units in April compared with 225,459 in March.”
Home prices have been resilient and prices continue to be higher over the same period last year, even more so for condos and townhomes which has been the darling of our market. Unfortunately prices often lag and we could see softening very soon. On top of this, mortgage interest rates have also increased making it yet again more difficult for buyers and borrowers. I think it is safe to say that market conditions are changing and homeowners need to be ready to adjust their selling strategies if they are planning to sell anytime soon.
The good news in all of this is that buyers will have more opportunities to find the right home. And although mortgage lending is currently very constrained, there are still great deals to be had. Variable rate mortgages are being offered as low as Prime minus 1% and a five year fixed rate can be offered as low as 3.34%. For the past few years many borrowers were not given the choice and had to settle for a 5 year fixed rate. Now if borrowers qualify for a 5 year fixed, they qualify for the other product choices such as 2 or 3 year terms and variable rate mortgages.
A huge bulk of mortgages across the province and country will be coming up for renewal this year. Borrowers often make choices based on fear and I caution you not to be fooled into accepting a high fixed term rate. Talk to an experienced mortgage broker. We can help guide you to the right solution. Click here to contact us.
The new mortgage rules have now been in place for only a few months and it’s already impacted housing across the country. Canada’s national average home price was down 5 percent and sales volume was down 17 percent in February from a year earlier. There was also near a 7 percent decline in the amount of transactions between January and February this year. This is the second month-over-month decline and the lowest reading in nearly five years.
The number of sales in BC has also plummeted since new federal mortgage rules took effect at the beginning of the year, however; it did not stop prices from rising. Average prices were up almost 9 percent in February from a year earlier. Sales of condominiums were impacted far less. The average price of a condo in Greater Vancouver rose over 27 percent from February last year. It may only be a matter of time before the prices of condos moderates but don’t hold your breath as the average prices rose almost 3 percent from the beginning of the year.
Mortgage rates have remained primarily stable over the past few months and the Bank of Canada meets again to set the rate on April 18th. I’m predicting the bank will not make any change to the rate. In fact we may see some downward pressure on mortgage rates. The uncertainty of trade relations, the impact of the new mortgage rules and the introduction of new housing policies have taken the steam out of rising rates. That being said, the US Fed raised rates on Wednesday and signals that more hikes are coming this year.
Qualifying today for a prime rate mortgage from a bank has never been harder but some of our lenders have relaxed lending criteria which can really make a difference in getting that approval. If your bank said ‘no’, then give me a click: tony@tonyiannetti.ca
It’s of no surprise, but the demand for private money has increased significantly over the past year. Rates for 2nd mortgages can be as low as 8.45% with only an appraisal being required. Taking a 2nd mortgage may be the ideal solution to access equity because it will allow you to preserve and keep the existing 1st mortgage in place. Have a question or need a rate quote: click here: tony@tonyiannetti.ca
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