Deciphering Mortgage Rates: Fixed vs. Variable Interest Explained

Did you know that the Bank of Canada’s Rate announcements don’t have any impact on the fixed rates at all?  I get several inquiries a day and there is a consensus that they do.  For instance, a new home buyer might suggest waiting to purchase a home as there has been a lot of talk around future decreases by the Bank of Canada, yet they are interested in a fixed rate mortgage.  Let me explain.

Variable Rates move with the Bank of Canada’s overnight lending rate.  For instance, if the Bank of Canada decides to reduce the overnight lending rate by 0.25%, then the lenders will adjust their Prime Lending Rate by reducing it by the same 0.25%.  The only metric manipulated by the lender is the spread between Prime Lending Rate and the rate offered by the lender.  So, if a lenders prime is 6.95%, the lender might offer a rate of Prime Minus 1.00%, which leads to a rate of 5.95%.  That same rate of 5.95% will move with the prime rate.  If the Prime Rate moves, then so does the rate accordingly.  The lender’s Prime Lending Rate also has the same effect on a Home Equity Line of Credit.  Lender’s can adjust their rate spread anytime, but it would have no affect on a mortgage already in place.

Fixed Rates typically follow the trends of Canada Bond Yields.  So, this would be a good metric to follow when determining where fixed will rates will go.  If Bond Yields trend upward, you can expect the fixed rates to do the same.  The same goes if Bond Yields trend downward, you can expect the fixed rates to do the same.  While it is not a perfect science, it is about the best metric you can you use to see where these rates are going.  Fixed rates also depend on a lender’s appetite for mortgage business.  Another determining factor is inflation, as inflation numbers go up, Bond Yields tend to follow and the same goes for decreases. 

In conclusion, the Bank of Canada’s rate announcements do not have any effect on Fixed Rates, they only effect Variable Rates.  Rates can be complicated, you should contact a broker, myself for assistance as to what might be best for your situation.  I can help you navigate this complicated space so you can make an informed decision. 

Mortgage Rates are Complicated: Different Types and What they Mean to You

 

Gone are the days that you can pick up the phone and call your Bank or Mortgage Broker to find out what the best rate you can get is.  If you do, you are likely to be asked several questions as interest rates have become very complicated.  Fortunately, having been a Mortgage Broker for near 2 decades, I have some creative solutions that can help get you the best mortgage.   

Here is a list of some of the major classifications of interest rates.  These are not to be confused with either fixed or variable rates as you would be selecting a term that fits your needs based on the criteria below. 

ü  Insured Rates

ü  Insurable Rates

ü  Un-Insurable Rates

Insured Rates allow you access to the absolute best rates in the marketplace.  To have an insured rate, you must be or previously had purchased a house with less than 20% down.  So, if you are purchasing a home with less than 20% or if you previously bought a house with less than 20%, they you would have paid mortgage default insurance, like CMHC, and this qualifies your mortgage product as an Insured Mortgage.  Insured Rates can apply to New Home Purchases, Spousal Separation Mortgages, 2^nd Home Purchases and Mortgage Transfers. 

Insurable Rates are the next best and allow you access to very reasonable rates.  You would likely have an Insurable Rate on your mortgage if you purchased or are purchasing a home with more than 20% down, thus avoiding the requirement for you to pay mortgage default insurance.  With an Insurable Rate, the mortgage would still be insured by mortgage default insurance like CMHC, but the cost is picked up by the lender and for this reason the interest rates become a little higher.  You can still qualify for the best Insured rates if you have 35% to put down or have 35% equity in your house.  These rates are priced in Loan to Value increments.  So, with 35% down payment or 35% equity in your house will offer you the best rates, when you get to 30%, they get higher, and then again at 25% and then finally at 20%.   Insurable rates can apply to New Home Purchases, Spousal Separation Mortgages, 2^nd Home Purchases and Mortgage Transfers.

Un-Insurable Rates are rates that are offered which are a little higher than all the previously mentioned.  They are considered un-insurable as mortgage default insurers such as CMHC won’t insure them.  They are typically applicable in situations where you want to refinance your house or extend the amortization of your mortgage to 30 years.  As they are un-insured, the lenders must source different funds for these mortgages.  You could typically see an increase from an insured rate to an un-insurable rate of around 0.5%.  Un-Insurable Rates can apply to New Home Purchases, Rental Property Purchases, Refinance Mortgages, Spousal Separation Mortgages and 2^nd Home Purchases. 

As there are many nuances to interest rates, again, having been a Mortgage Broker for nearly 2 decades, I have figured out some strategies to accomplish obtaining the best possible mortgage for your situation. 

Contact me to find out what type of rate and mortgage you qualify for. 

** OAC, Rates Subject to Change and are subject to lender / insurer approval. 

The Do’s and Don’ts of Filing your upcoming taxes you should know!

 

Tax Season has officially kicked off.

The Do’s and Don’ts of Filing your upcoming taxes you should know!

 

Now that we are in to the 2022 Tax Season, it is a really good time to take a look at your goals for this year.  Determining your goals will help you decide how you should file your taxes, especially if you are self employed.  As I am sure you are aware, it has been increasingly difficult to get a mortgage if you are self employed as of late. 

On one hand you want to lower your income by using as many expenses as you can to reduce the amount you pay in income taxes.  On the other hand, doing so reduces the amount of income you have to work with for qualifying for a mortgage.

Prior to submitting your taxes, perhaps before you contact your accountant, I would suggest you ask your self the following,

• Is my mortgage coming up for renewal this year or the next year?  If so, as lenders may require your income for 2022, you will want to make sure your income is high enough to qualify.  Further, in a lot of cases lenders will require a 2 year average, so you will want to be sure to plan this year for a renewal in 2024.
• Do I plan to purchase a new home this year?  Again, if so, most lender’s will require that your taxes are filed for 2022 for a couple of reasons. They will want to use it to determine what income they can use to qualify you.  Further, they use your notice of assessment from CRA to determine if you owe any money to Revenue Canada.
• Am I planning to refinance or pull equity out of my home?  Same applies as above, you will want to be sure your income is high enough to qualify.  As well, if you owe Canada Revenue Agency any money, you will have a great opportunity to use your home’s equity to clear the debt to avoid any penalties and late charges. 

As your mortgage advisor, whatever your goals, I can help you determine the best strategy to deal with your taxes and make sure you are put in the best possible position. 

Key Takeaways:

·       Plan far in advance if renewing, purchasing, or refinancing in the next couple of years.  Doing so can put you in the best possible position to accomplish your goals.

·       Planning ahead can get you access to the best rates and mortgage products available.

·       Contact a professional to help you with your taxes, especially if you are self employed.  Taxes have become more complicated over the years and a professional can assist you in obtaining your goals while still getting the best return, or rather to avoid paying too much to Canada Revenue Agency.

·      I can offer free advice prior to filing your taxes and offer you advice based on your specific needs.

·       If you owe Revenue Canada money and you have enough equity in your home, I can help you with a strategy to clear that up. 

Bank of Canada Rate Increases Again!

 Bank of Canada Announced Another Rate Increase Today

Is this the beginning of the end of the Bank of Canada’s rate hikes? Today the Bank of Canada announced yet another increase of 0.25%, their 8th consecutive rate increase. That means the Banks Prime rate has increased from 6.45% to 6.70%, most of them anyway. This increase for the average mortgage in Alberta of $340,000 represents an increase of approximately $50 per month on your monthly mortgage payments. We are now sitting at the highest Prime Rate we have had since 2007. It was right around then that Prime rate had peaked and eventually made a gradual decrease, I am hoping we will see something simliar.

That said, it is speculated that there will be a pause on future increases for the time being so we can see the impact these increases have had on inflation.

If you are currently in a fixed rate mortgage, you won’t be affected by these increases. If you are in a variable, you will see your payments adjusted or the amount paid to interest increased.

Please feel free to contact me with any questions or for advice with respect to mortgages, mortgage rates and so on. I am always happy to listen.

The Next Bank of Canada Meeting is scheduled for March 8, 2023. 

Get off to a Great Start by going Debt-Free!

 

You Can Get Out of Your Debt-Cycle by Using Your Home Equity

Credit Card debt, lines of credit, loan payments and interest payments could be standing in the way of your financial security. With rising costs for pretty well everything, it could make it near impossible to get ahead with your debts. Now is a great to take control of your debt cycle through Debt Consolidation or an Equity take out. It’s a simple concept: roll up all the extra debt owed outside of your mortgage and consolidate it in to an existing mortgage or a new mortgage. If you have equity in your home, it is the simplest way to eliminate debt. Getting in touch with me, I can quickly assess your goals to figure out what your options are. Best of all, my advice is under no obligation and it is free. Key Advantages of Debt Consolidation: · Trading multiple higher-interest debts for one lower rate · Lowering your monthly payments · Get out of debt faster and free up some cash-flow · With my strategies I can show you how to pay off your mortgage faster also Debt consolidation can offer a big relief for someone who is struggling with their monthly debt load. If can’t help you, I more than likely can offer some solutions that can help also.

Have you Taken a Look at your Financial Picture Lately? 🏘️💵

 Mortgage Health Check-Up

An annual review of your mortgage is important as your needs and life circumstances may have changed. As your “Mortgage Broker for Life”, I provide a Free service in which I will review your mortgage and your individual situation to review as part of my Mortgage Health Check-Up. You may have a mortgage that is not right for you anymore.

Please see 5 reasons that you may need a Mortgage Health Check-Up,

1. You may have a Rate Higher than you could get today.
• Variable rate higher than Prime Minus 0.5%.  Further it is possible we see upwards of 1.5% rate increases on this by the end of the year. 
• If your mortgage is coming up for renewal in the next year you may want to consider your options now as fixed rates have been rising over the last year. 
2. You may be carrying a lot of debt at very high interest. If you are sitting on even $20,000 in debt, you could save Hundreds, if not Thousands in interest and lower your monthly payments.
• Why not roll the debt in to your mortgage?  With my strategies, you don’t have to start over, but you can save thousands and pay off your mortgage even quicker.
3. Your house may need costly renovations or upgrades. Including these expenses in your mortgage will a lot cheaper than trying to obtain 3rd party financing at higher interest rates.
• I have a refinance plus improvements program which is extremely useful in these situations even if you don’t think you have enough equity.
• You may have more equity than you think.  Property values are still really good. 
4. Is your mortgage up for renewal this year or next?
• I have helped several clients lately get in to lower interest rates now. You won’t have to worry about future rate increases.
5. You have an extraordinary expense coming up.
• Do you have a child going to college, or getting married?
• Perhaps you want to help your children to purchase a house of their own.

Ask the Experts

While home mortgage health checks are a fantastic way to refinance your mortgage and reassess your finances, we don’t expect you to do all of the above yourself. Whatever questions you have relating to reviewing your mortgage, it’s always a good idea to contact a lender or your financial adviser. As experts, a mortgage broker can provide you with the most appropriate advice when it comes to switching to another home mortgage product that suits your requirements.

Bank of Canada Increases Overnight Lending Rate Again!

 

INTEREST RATES CONTINUE TO SOAR Today the Bank of Canada decided yet again to increase the overnight lending rate. Prime rate with the lenders has risen from 4.70% to 5.45%, which is a significant increase. An increase of 0.75%. Prime rate has not been this high since 2008. With the recent change, it is fair to assume that the average Variable Rate is now sitting at approximately 5%, which is now pretty close to what you can expect for fixed rates currently. There is further speculation that the Prime lending rate will remain unchanged for the foreseeable future. That said, only time will tell. The next meeting date is scheduled for October 26, 2022. If your Mortgage is coming up for renewal in the next 12 months, or you want to take advantage of current home values, or if you just want a quick Mortgage check-up, give me a call now!! I would be happy to off free advice as to what your options might be. Did you know, if you have a variable rate, more often than not you can break the mortgage with a simple 3 months interest penalty? If you think this information could help out a friend or a family member, I would really appreciate it if you would forward this email or provide them with my contact information. I will look after them as if they were a friend or family member to myself. Book a Virtual Meeting Now!! Phone / Text 403-828-1838 Email: mortgages@shawnmooney.com Website: www.shawnmooney.com Some conditions may apply. Rates are subject to change. Subject to lender / insurer approval.

Purchasing a 2nd Home May Not Be as Difficult as you Think!

 Are you Interested in Purchasing a 2^nd Home?

Did you know you may be able to purchase a 2^nd home with as little as 5% down payment?  I have recently found several inquires involving questions with respect to minimum down payment requirements.  Most people are of the opinion that there is a minimum down payment requirement of 20% which puts this option out of a reach for most.  That is not the case. 

I recently arranged a mortgage for a client who wanted to help her daughter and son in law get into a new home, but they could not qualify for the mortgage on their own, we did a new house purchase with 5% down.  I also assisted some other clients in purchasing a vacation home that they can enjoy with their family.  These clients used their Home Equity Line of Credit to come up with the minimum 5% down payment requirement.

• I have a number of lenders who offer mortgages under their 2^nd Home Program.  Below are just some of the benefits to this program.
• Purchase a home with as little as 5% (must be below $500,000, otherwise 10% of everything over $500,000 for a down payment)
• Access to the lenders best rates, so won’t be penalized
• Exercise the lenders pre-payment privileges to pay down your mortgage faster
• Can you your existing homes equity to come up with the down payment
• Purchase a vacation home
• Purchase a home for your children
• Turn your current home in to a rental so you upgrade your house

My lenders are flexible and offer excellent solutions for purchasing your 2^nd home.  Within just a couple of minutes I can help you come up with a budget so you can start your new home search.  Call me now to explore your options. 

Please note, property must be owner occupied, 2nd homes occupied by related family members is ok. 

Buying & Selling, What you Need to Know!

Buying & Selling, What you Need to Know!

Good day, If you are considering purchasing and selling in today’s market there are a few factors that I would suggest you take in to consideration. As I hear from the bank’s and lenders on a regular basis I felt the need to share some of what the lenders have been communicating. A couple of lenders have reached out with cautionary tales of multiple deals having collapsed due to current market conditions. Client(s) purchased a home a month or so ago due to the hot real estate market, thought they could sell in no time for over asking which has resulted in a disaster for some. Homes are staying on the market a little longer which has led to slightly lower sale prices, leading to seller desperation and loss of thousands of dollars on the house sale. I am also seeing appraised values for house purchases and refinances coming in a little low. Below are just a couple of suggestions as to how you can protect yourself. Before writing an offer on a new purchase, have a Realtor do a market analysis to determine the estimated sale price of your home and how long they think it would take to sell. As they are helping purchasers and sellers everyday, they would have the most accurate information as to what you can expect. Better yet, get more than 1 opinion, some Realtors will set unreasonable expectations to obtain your business. Get your house ready to list before purchasing another house. Put on that fresh coat of paint, de-clutter and get your home in optimal sale condition. I am finding a lot of sellers are purchasing while not even having the house they live in ready for sale. Things are still moving pretty quickly, this will give you the best opportunity to get your house on the market quickly. Get a pre-approval up front so you know exactly what you can afford to purchase. I wouldn’t recommend you do any of those online quick mortgage applications as the information might differ from what we can actually use. Personally I would do an application, request / review your documentation and provide you with very accurate numbers as to what you can qualify for. Plan for a worst case scenario. If you end up having to accept a lower offer than anticipated, be sure you can qualify for a higher mortgage amount, or you could plan to take money out of savings to cover the shortfall. Remember to factor in Realtor commissions and the GST from the commissions in your numbers. Have a co-signer in your back pocket just in case. Nobody wants to have a co-signer, that said, if you were to line up a strong co-signer, then you wouldn’t be in a predicament should you decide to hold on to your sale property in hopes for a higher sale price. If you think this information could help out a friend or a family member, I would really appreciate it if you would forward this email or provide them with my contact information. I will look after them as if they were a friend or family member to myself.

Book a Virtual Meeting Now!!

Phone / Text 403-828-1838 Email: mortgages@shawnmooney.com Website: www.shawnmooney.com

Some conditions may apply. Rates are subject to change. Subject to lender / insurer approval.

Should I Turn My Home into a Rental Property?

 

Should I Turn My Home into a Rental Property?

Good day!! These days a lot of people are seeking options to purchase a 2nd property to move into but would prefer not to give up their current property. The Banks are not making this a very easy process for qualifying with their rules for using rental income and rental property expenses. We have multiple lenders who will make easier for clients to purchase a new home with a more common-sense approach. Below are just a few benefits to turning your home into a rental property. Purchase a new home with as low as 5% down Lower mortgage payments on your existing home will produce a profitable rental in which you can make money each month on it Increased value on 2 properties at the same time Owning a Rental Property is achievable

For this Illustration, the Bank’s are required to use only half of your rental income, so $1,000 and 100% of the expenses, so adding the mortgage, property taxes along with $100 for heat. Our lenders typically allow for an 80% use of rental income which in this case would produce an increase to your income. As you can see, with the Bank’s calculations qualifying amount would only be $465,000 vs. $580,000 with our more creative lenders. Subject to lender/insurer approval. Qualifying rates are subject to change.

Are You Swimming in Debt?

 

Are You Swimming in Debt?

Good day, After a long couple of years, a lot of us have found ourselves with a little more debt than we would like. Join the many I have already helped to lower their monthly payment obligations and get out of unsecured debt. On average I am seeing monthly payment savings of approximately $1,000. I don’t know about you but I could sure use the extra money in my pocket. The reality is, property values have risen quite a bit over the last 6 months which is allowing people the opportunity to pull out equity and consolidate everything. Not only that, but with my strategies, don’t think of this opportunity as starting over. You can use the savings you achieve every month to take advantage of excellent pre-payment privileges to pay your mortgage off even quicker than before which will in turn improve your long term financial freedom. In just a couple of minutes I can determine exactly what that will look like for you. Give me a call now if you think this might be of interest to you! If you think this information could help out a friend or a family member, I would really appreciate it if you would forward this email or provide them with my contact information. I will look after them as if they were a friend or family member to myself.

Book a Virtual Meeting Now!!

Phone / Text 403-828-1838 Email: mortgages@shawnmooney.com Website: www.shawnmooney.com

Some conditions may apply. Rates are subject to change. Subject to lender / insurer approval.

Credit Tips for Home Ownership

 

CREDIT TIPS FOR HOME OWNERSHIP

Good day!!! I love what I do. One of the most rewarding parts of what I do, is when I have a client who is very close to purchasing but cannot because their credit is just a little bit too low. I put this email together for one of my clients recently and with a little work on their part, and around 1 and a 1/2 months, they were able to achieve home ownership. These tips don’t only apply to a first time home buyer. Having been in the mortgage industry for a long time I have a really good idea as to what needs to be done in order to get the best credit score. Mortgage lenders like to see that you have 2 active trades on your credit bureau reporting ideally for a period of 2 years. If one is less than this, we can still work with that. So, if you only have 1 currently, I recommend you apply for another one right away. I usually recommend Capital One, even if you have one already. Even a secured card would be sufficient. Try to get the available credit limits to at least $2,000. I wouldn’t recommend you keep asking them to do this but to wait for a period, like 6 months and then ask. Asking too much may result in unwanted credit inquiries which could impact your credit score. DO NOT, ever let your cards go over the Credit Limit, doing so leaves this information on your credit bureau which will negatively impact your credit score. When you are ready to apply for a mortgage, make sure the balance to credit limit is no higher than 30%. Make sure this has been taken care of 1 to 2 months prior to applying as it can take time to reflect this on the credit report. Prior to this, it doesn’t really matter unless you go over the credit limit. For example, if you have a $2,000 credit limit, you want to keep the balance below $600 when applying for the mortgage. Do not allow multiple inquiries into your credit report. Doing so can lead lenders to believe you might be a “credit seeker” and could impact your credit score. For any major purchase decisions, you should contact me first. I can offer you advice as to how this new loan can impact your ability from an income perspective to qualify for a home. You should contact Equifax and request a free copy of your credit report. Doing so may uncover any issues, or things that are being reported incorrectly which you should fix long before you attempt to purchase a home. Equifax Free Report https://www.equifax.com/personal/credit-report-services/free-credit-reports/ Equifax Online Dispute https://www.consumer.equifax.ca/personal/dispute-credit-report/ If you have any Judgements or Collections, it is important to settle them prior to applying for a mortgage. Mortgage lenders every single time require these to be settled prior to obtaining a mortgage. If you are unsure as to whether or not you should you should contact me for advice. There are some cases in which I would recommend you leave them. If you are to get into any disputes with a creditor, cell phone company or cable company, I would recommend you pay these accounts and then dispute them, so they do not report to the credit bureau. Once these companies register a judgement or collection, they are extremely difficult to get rid of. Before speaking to anyone about debt consolidation, or money mentoring of any kind you should reach out to me as I can offer advice as to what kind of service the company might be offering, and therefor provide you with advice as to whether it is a good idea. DO NOT co-sign for any credit. Doing so will potentially cause you 2 issues. The first of which is the potential for missed payments that are outside of your control. The other, is you must qualify with the extra debt as if it was your own. It doesn’t matter if you don’t make the payments. DO NOT Close any of your revolving credit accounts once paid out or prior to closing. Having access to more credit while not using it will help to increase your credit score. If you think this information could help out a friend or a family member, I would really appreciate it if you would forward this email or provide them with my contact information. I will look after them as if they were a friend or family member to myself.

Book a Virtual Meeting Now!!

Phone / Text 403-828-1838 Email: mortgages@shawnmooney.com Website: www.shawnmooney.com

Some conditions may apply. Rates are subject to change. Subject to lender / insurer approval.