There's a lot of buzz around the future of mortgage interest rates at the moment...and for good reason.
We all know that COVID has hurt our economy and we are currently experiencing some of the lowest interest rates in history because of it.
Our economy has recovered somewhat but we still have some work to do and, as I write this, the Omicron variant is really making things difficult.
As our economy digs out of the COVID ditch, the Bank of Canada will need to increase interest rates in order to try to control our inflation rate.
They do this using something called the Overnight Rate. If they adjust the Overnight Rate, then our major financial institutions will also adjust the Prime Lending rate by the same increment (usually).
For those of you who have a variable or adjustable rate mortgage, any change in the Prime Lending rate means the interest rate on your mortgage will also change.
Don't worry though, your interest rate won't change at any given moment. The Bank of Canada meets 8 times per year to discuss things and decide if they are going to make a change to their Overnight Rate.
The image attached to this post shows the Bank's schedule for 2022.
No one knows for sure what to expect regarding when the first interest rate increase will come and how quickly rates will rise after that, but we do know that the rates will increase at some point and it sounds like at least the first one will come at some point here in 2022.
If you have a variable rate mortgage and are concerned about the rate increases, remember that you do have the option to lock your mortgage into a fixed rate at anytime, but I do recommend that you connect with your Mortgage Broker to discuss the options before you commit to anything.
For more information on how variable/adjustable rates work, visit my fixed vs. variable page.
The housing market is hot...which isn't necessarily a good thing for everyone.
If you've been shopping for a home lately, there's a good chance that you've fallen in love with a home and written an offer only to get outbid by another buyer...so frustrating.
Then you find out that the seller of the house accepted an offer that didn't have a finance condition in it...but your Mortgage Specialist advised you to always include one in any offer you write...what gives?
After several unsuccessful offer attempts, you'll start to feel defeated especially if you're losing to other people who aren't including finance conditions in their offers.
You might feel tempted to scrap the finance condition and roll the dice without one.
Here's what you need to know before you write an offer with no finance condition included:
A finance condition (a.k.a. condition of financing) protects the buyer making the offer in case the Mortgage Default Insurers (CMHC, Canada Guaranty, or Sagen) decline the application for any reason. Some examples as to why they might decline the application might be that they suspect that there's fraud involved in some way, the home was flagged as a former grow-op, the home was involved in a crime at some point in it's life, they uncover some other information about the home that was not disclosed from a previous sale, etc.
If your down payment is 20% of the purchase price or more, and therefore Mortgage Default Insurance isn't required, then there's a good chance that the Lender will request a full appraisal of the property.
If an appraisal is done and the report comes back at a lower value or the appraiser discovers a major fault such as knob and tube wiring, aluminum wiring, asbestos insulation, foundation issues, etc., the Lender can decline the deal.
If any of these things happen to you and you don't have a finance condition in your offer, you will have to back out of the deal and lose your deposit...and possibly face a law suit.
If you have a finance condition in your offer, you are able to back out of the deal, get your deposit back and move on to the next house.
Of course it's frustrating to lose out on what you feel to be the perfect home, but unfortunately there is no way to guarantee an approval on any property in advance of making an offer on it.
The finance condition is there to protect you in case anything goes wrong.
Think about it this way; if an Insurer or Lender has a problem with the property you want to buy, shouldn't that be a red flag? Maybe you don't want it either?
The decision is ultimately yours but as your Mortgage Specialist, I wouldn't be doing my job if I didn't do whatever I can to protect your interests in one of the largest purchases you'll ever make.
Feel free to reach out to me anytime if you'd like to discuss this further or have any questions at all.
Most mortgage borrowers in Canada don't miss mortgage payments. Even if times get rough, most will either use their line of credit or even borrow money from family or friends to make it through the tough times.
If you are late on your mortgage payment, but still make the payment in full within 30 days of the due date, then you shouldn't be in too much trouble. Probably just a late fee from your Lender.
If you are late by more than 30 days, there can be serious damage done to your credit and possibly collection efforts taken by the Lender.
It doesn't have to get to that...even if money is tight for a period of time.
If you feel like you can't make your mortgage payment, contact your mortgage Lender as soon as possible to discuss your options. Many Lenders offer skip-a-payment programs where you can, you guessed it, skip a payment once per year. Some Lenders will also offer an interest only payment options or a deferred payment option...just like we saw when the COVID pandemic first started.
We're only human and stuff happens sometimes. As long as you approach your Lender as soon as possible, if you run into trouble, then you should be able to work with them to minimize any damage that would be caused by missing a mortgage payment.
Should you find yourself in a similar situation and need advice on how to proceed, please don’t hesitate to reach out. I’ll be more than happy to assist in finding a solution.
For most people, purchasing a property is the largest financial investment they'll make.
Managing the expenses that go along with home ownership can cause many people a lot of stress and anxiety...especially the mortgage payment itself.
Here are a couple ideas to help you minimize stress while managing your mortgage payments.
Time Your Mortgage Payments To Match Your Payroll
If your chequing account is like mine, it's like a revolving door of money going in and then coming out just as quickly. Monitoring the account regularly to make sure there's enough money in the account to cover the mortgage payment can cause stress for a lot of people.
By setting your mortgage payments to come out of the same account that your payroll is deposited into, and on the same day as you get paid, you don't have to worry about the account balance and therefore your stress can be reduced.
If you can't have the mortgage payments come out of your payroll account, then set up an automated money transfer so that the necessary funds are automatically transferred for you.
Lower Your Mortgage Payment
If the balance owing on your mortgage is less than 80% of your property's current market value, then you may qualify to refinance your mortgage.
Refinancing, under the current mortgage rules, will allow you to stretch your amortization period out to 30 years which will lower your mortgage payment and provide some stress relief.
Refinancing doesn't always make sense so be sure to speak with your Mortgage Broker/Specialist (me) about your options.
You can learn more about refinancing here.
Pay Off Your Mortgage Faster
If you're the type of person that just isn't comfortable with debt of any kind, paying off your mortgage sooner can obviously relieve a lot of stress...if you have the means to do so, of course.
There are many ways to pay off your mortgage a little sooner. Each Mortgage Lender has different rules around this but here are a few of the most common ways to do so:
-You can choose Accelerated Weekly or Bi-Weekly payments. This will increase your regular weekly or biweekly payment slightly but will pay off your mortgage faster and you probably won't even feel the slight increase in payment on your budget.
-You can pay extra on your mortgage using lump sum payments. If you get a nice income tax return or get a bonus at work, you can put that money right onto your mortgage.
-You can double up your payments. This is similar to making a lump sum payment but you are literally just making the equivalent of 2 payments at once. Part of your regular payment goes towards paying down the principal balance of your mortgage and the other part goes to interest...but the second (double up) payment goes completely against the principal balance.
Having your mortgage paid off is most people's dream but many people think that you need to be rich or come into a large sum of money to get there early. But, if you use some of the methods I've listed above, you can pay off your mortgage sooner without really feeling a pinch on your budget.
These are just a few tips on how to address the mortgage stress you might be feeling.
If you are feeling stressed about your mortgage, I'm always available to chat and we can see what options we can figure out.
Contact me anytime!
Many homebuyers assume that if you're pre-approved, then your mortgage is basically guaranteed.
This isn't always true. A pre-approval doesn't automatically mean that a Lender will approve your mortgage.
Here's what a pre-approval actually is and whether you should get one or not.
A pre-approval is a conditional approval based on your current financial situation.
The pre-approval process requires the collection of credit information, a full credit check and collection of necessary documents required to support your financial situation.
When your Mortgage Broker has successfully completed your mortgage pre-approval, you can feel confident knowing that Mortgage Lenders will give you a mortgage.
However, before a Lender will fully approve a mortgage, they must review and approve the details of the property your attempting to purchase which may include the need for an appraisal. The Lender needs to be comfortable with the condition, location and the price of the property.
Should you get a pre-approval?
A pre-approval is free, it provides you with piece of mind knowing exactly how much you're qualified to spend so that you can confidently shop for your dream home, and having a proper pre-approval through a Professional Mortgage Specialist (such as myself) gives the seller confidence knowing that if you write an offer on their house, chances are really good that the deal will go through so they are more likely to accept your offer!
Contact me today to discuss the pre-approval process in more detail.