What should I do with my mortgage in 2019?

If you’re recovering from a good party on New Year’s Eve, here is something to sooth your real estate woes. But if you’re like me, I had trouble staying up past 10 pm and am ready for a new and profitable year!

With all the volatility in the last year around mortgage rates and the real estate market, we can expect stability in 2019. This email is longer than usual but it’s worth the read if you’re interested in real estate.

IT’S A BALANCED MARKET SO IF YOU’RE A FIRST-TIME BUYER OR A REAL ESTATE INVESTOR NOW’S YOUR OPPORTUNITY.

In the last three years, sellers have had the upper-hand in the market. If you had a property to sell, and it was reasonably priced it would sell in no time. There are still hot spots in the market especially lower-priced homes or condos under $400K. That’s because of the demand from three key cohorts:  first-time buyers; real estate investors, and those down-sizing.   The new mortgage rules have affected these cohorts the most. Many self-employed individuals are also having difficulty getting approved at a bank.

The 2018 real estate market ended with a whimper, but there are two converging trends that may give the housing market a boost in 2019. The unemployment rate is at historical lows and when people are working they are buying or able to refinance and pay their debts off. The Bank of Canada (BofC) is also slated to keep rates steady into 2019 because the prospect for inflation is low (have you seen the cost of gas lately?).

There’s also been a lot of attention placed on consumer debt loads. With the new mortgage rules borrowing has slowed and home appreciation is on a more sustainable increase. First-time buyers are also benefiting from their parents, as a massive transfer of wealth is happening both in terms of gifted down payments and co-signing on mortgages.

WHAT SHOULD I DO WITH MY MORTGAGE?

If you’re renewing your mortgage it may make sense to pay the penalty and renew early especially if you’re looking at consolidating debts. Your improvement in cash flow will offset the penalty so it’s worth considering. Five-year fixed rates are currently just under 4% and we can typically get at least a .5% lower on a variable rate mortgage (CRM). So does it make sense to do a VRM? About 40% of our clients have a VRM.  Even if rates go up this year by .5% you’re still further ahead especially if you can make a pre-payment on your mortgage while rates are low.  I currently have a VRM so I track this carefully for myself and when I’m locking in I’ll let you know too.

IF YOU KNOW SOMEONE WHO’S BEEN TURNED DOWN BY THEIR BANK – TELL THEM TO CALL US. WHY? WE CAN PROBABLY GET THEM APPROVED.

As a mortgage broker, not only do we do mortgages for chartered banks like TD and Scotia, and credit unions like Meridian and Your Neighbourhood Credit Union, we also have access to lenders that will lend to borrowers even if they don’t meet the usual criteria. Have your friends or family come to us first, as it’s our goal to get the best mortgage that the borrower can qualify for.

It's been a while...what's up?

It's been a while since I've posted on the blog...what's up? Well, there's been a change in the ownership of my business, and it's good news for our clients and business partners.

I'm working in partnership with Chris Bisson, one of the top mortgage brokers with The Mortgage Centre network in Canada. We've teamed up because he's great at helping our referral partners (such as realtors, accountants, financial planners and lawyers) with their own businesses. And I love helping our clients get the best advice and rates around mortgages to help them be financially successful. The really cool thing is that Chris and are spouses...we've been married for over 17 years, but we worked independently! I know it was a little "weird".

We're really different at The Mortgage Centre (Guelph). With the decades of experience, and helping thousands of clients we have the knowledge that most mortgage bankers and other brokers don't have. I know that sounds "canned", but just give us a call to find out.

We're here to help (and we're not the bank!) Tel 519-763-3900519-763-3900 - you can reach me directly at ext. 1001 or via e-mail at lastovic.s@mortgagecentre.com

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Wondering why fixed rates are up but not variable?

 Here's a great explanation on why fixed rates are going up. 

I've been receiving panic calls from clients regarding their variable rate mortgages with the concern that their rates where climbing. Variable rate mortgages are priced off of an institution's prime rate (which can be impacted by the Bank of Canada overnight lending rate), which is a different indicator than the bond market.

Thanks to www.canadianmortgagetrends.com for the below article!

 

 

Yields, Swap Rates & Fixed Rates — Higher Yet Again

Bond yields have been going vertical.
By early Thursday, the 5-year yield—which influences long-term fixed rates—was up as much as 20+ basis points in less than 48 hours. That's an unusual move and it was driven by optimistic economic comments from the U.S. central bank.
This spike in yields has led dozens of lenders to announce fixed rate increases. The most notable today was RBC, which is boosting certain discounted fixed rates by 20 basis points on Monday.
But it’s not only bond yields that are flying. So is the 5-year swap spread, and that also has mortgage rate implications.

Swaps Basics
A “swap” (interest rate swap) is an agreement to exchange two different types of interest payments:  fixed-rate payments and floating-rate payments. Financial institutions buy swaps to hedge interest rate risk and lock in profits.

A simplified example of hedging: A bank with 5-year fixed mortgages receives fixed-rate payments from borrowers. That same bank also has short-term deposits. If short-term rates rise, the bank would have to pay higher rates to depositors, but be left with the same fixed rate payments from its mortgages. To solve that problem, the bank buys a swap that lets it receive floating-rate payments (at a higher rate than it has to pay out to depositors). In exchange, the bank must give its fixed-rate payments to the swap seller.

Why swaps matter
The difference between the 5-year swap rate and the 5-year government yield is called the "swap spread."
When the swap spread gets wider, fixed mortgages can become more expensive to hedge, other things being equal. That often happens when bonds sell off and yields soar. Lenders then pass along that added cost to borrowers.
Here’s a chart of the swap spread from earlier Thursday. As you can see, it has been making new relative highs.

(Click to enlarge)

Swap spreads may continue to widen if Canadians rush to lock in low rates. In that scenario, banks would have even more fixed-rate mortgages to hedge in the swap market.
It’s hard to say how long rising yields and widening swap spreads will exert upward pressure on rates. So if you need a mortgage in the next 180 days, call your broker or banker soon for rate hold. Some protection is better than none, and you can always cancel a rate hold if needed.

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Guelph and Area Real Estate Forcast for 2013

I've attached an article below from the Financial Post published earlier this week about Canadian housing market and the cooling we'll see in 2013. I've also listed below local forecasts for the Guelph Real Estate Market quoted from Canada Mortgage Housing Corporation (CMHC), with a summary of the implications. I'd love to hear from you on your thoughts.

Here is the local forecast for 2013:

- Balanced market for Guelph is forecasted with an equal number of buyers and sellers (as compared to a sellers market in 2012)
- the forecase sales decrease in Guelph will be approximately 5.3%
- the housing market will pick up in the second half of 2013 (the key drivers will be low rates and net migration)
- first-time homebuyer demand will be lower, as buyers take longer to make choices
- listings in 2013 will decline
- Guelph will experience slower employment and growth, with a boost in job creation in the second half of 2013

What does this mean if you own real estate in the area?

- If you are serious about selling your home in 2013, ensure your house is priced correctly. If buyers are pickier and there's more buyers in the market, the longer your home sits on the market, the less likely you'll be able to sell it.

- Be conservative on what equity you can expect in 2013. When you run your numbers with your mortgage professional, be sure there is enough equity to pay for the costs of buying your new home. I find people in general think their home is worth more than what the market will bear.

- Get a full pre-approved for a mortgage in advance regardless if you are a first-time homebuyer or already have a mortgage.  Because of the tighter mortgage rules, you want to be sure you can buy the house your realtor is showing you!

Please call or e-mail me if you have any questions at tel: 5197633900 ext. 1001 or lastovic.s@mortgagecentre.com. Your comments are also appreciated it!




Cooling housing market shows stricter mortgage rules working: Flaherty:
Canada’s finance minister is taking credit for the recent cooling in the hot housing market, saying a slowdown now is better than a crash later.
Jim Flaherty was reacting to the sudden loss of momentum in the Canadian economy and the role housing, with the sector contracting 3.5% annualized in the third quarter, is playing.

Less demand, lower prices, modestly, in the housing market are much better for Canadians than a boom followed by a bust

The government moved for the fourth time in as many years to tighten mortgage availability in July, resulting in a sharp reduction in housing activity, resales and even lower prices in some markets.
“The housing market has softened somewhat in part because of steps that I’ve taken and I’m happy about that,” he said.

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“Less demand, lower prices, modestly, in the housing market are much better for Canadians than a boom followed by a bust. So I’m all for a soft landing.”
Flaherty and Bank of Canada governor Mark Carney have been warning Canadians for more that two years they were taking on too much debt, particularly in real estate. But with the economic growth at low ebb, Carney was unable to slow down the market with interest rate hikes without impacting the economy as a whole.
That left the policy brake in the hands of Ottawa, and in late spring Flaherty announced government insured mortgages would have their amortization periods cut to 25 years from 30. The impact was to raise the cost of monthly payments on a typical $350,000 mortgage with 3% interest by $184. The move also reduces the amount a homeowner pays in interest over the life of a mortgage.
CIBC economists Benjamin Tal said Flaherty’s latest move, which went into effect in July, was the only one of the four that was done at a time the housing market was already showing signs of cooling.
That speeded up the decline, Tal said, adding he does not believe the correction is over. He expects house prices will drop about 10% on average over the next year.
“(Still) I do agree it was necessary,” he said. “It’s good to slow housing when you want to slow it, as opposed to having it slow because interest rates rise or there’s another recession.
“(The correction) is not insignificant, but it’s not going to push us into a U.S.-style crash,” he added.
Flaherty said he is also pleased that Canadians appear to have heeded the message about getting their finances on a more sound basis.
Canadian households now hold about 162% more debt than their disposable annual income, a record level. But the growth in credit has been slowing in recent months.
“When it comes to consumer debt, I am encouraged by the reaction of Canadians. More Canadians are paying down their mortgages, more Canadians are paying their credit cards on time. This is very desirable,” he said.
With housing acting as an unexpected drag, Statistics Canada reported Friday that growth braked to a meagre 0.6% in the third quarter this year, the third consecutive quarterly decline of the year.
Flaherty said he was not overly concerned about the disappointing third-quarter result, saying he believes the momentum loss is temporary.
“It’s a time in which we are going to be buffeted, there’s going to some months better than others, but overall we will be OK with modest growth next year,” he predicted.
“We are on track … for modest growth, moderate growth, in the next fiscal year.”
Economists do expect a economic rebound in the current fourth quarter of 2012, blaming part of the third quarter’s losses to temporary shutdowns in the oil patch, but still say the economy will remain weak.

Secured lines of credit: What are they good for?

I’ve recently recommended secured lines of credit (or SLOCs) to a few of my clients instead of a mortgage.  SLOCs are similar to variable-rate mortgages, as the rate changes depending on the prime rate. However, SLOCs are also unlike variable-rate mortgages because: (1) only the interest is due on the payment date (instead of both the interest and principal), and (2) they are fully open (which means that they can be paid off at any time without a penalty).

Here are a few scenarios where it may be more appropriate to get a SLOC instead of going with a more traditional mortgage:

1. A SLOC could be for you if your mortgage is coming up for renewal and you are planning on purchasing a new house, or if you are not sure what your future plans may be

SLOCs are an inexpensive way to allow yourself more time to decide what you’d like to do with your home.  For instance, if you’re planning on moving within a year but aren’t sure about specific plans, SLOC’s can help bridge the gap until you’ve got a more solid “game plan.” Moreover, speaking with a mortgage professional can further help you plan out your next move – from a financial perspective.

2. A SLOC could be for you if you are planning a significant renovation on your home

You can incorporate renovations into your home through your mortgage, but if you’re planning a significant renovation you may want to consider a SLOC. A SLOC would allow you to pay your contactors as required, and would put you in control of the money – as opposed to your bank, for instance, which can be inefficient. Once the renovations are complete, a traditional amortized mortgage can be put into place. Your “new” property would then be appraised at that time to confirm the improved value, and an amortized mortgage would help you pay down the renovations in a timely and organized way.

3. A SLOC could be for you if you are investing equity from your home into a non-RRSP, or real estate

Whenever you use the equity in your home to invest in a non-RRSP or real estate, the interest on that portion of the mortgage, or SLOC, is a tax deduction. Because you may not want to pay off the principal on the investment loan, a SLOC could be a more appropriate loan than a traditional mortgage.

These examples are just some of the ways to best use a secured line of credit. Please contact me directly via e-mail at lastovic.s@mortgagecentre.com or call me at 519-763-3900 ext.1001 to discuss your questions.