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.

Are you an orphaned mortgage holder?

Do you have a mortgage that’s coming up for renewal and the mortgage broker that you originally arranged your mortgage through is no longer in business?

The Mortgage Centre can adopt you!

At The Mortgage Centre, we love brokering a mortgage, but it’s a tough business. That’s because it’s purely commissioned based. In the majority of cases, mortgage brokers don’t charge their clients a fee – they get paid a small commission based on the financial institution the borrower chooses. Only in a few cases do mortgage brokers charge a fee. Such as, if the borrower is considered a higher credit risk because of weak credit or job instability. So, many mortgage brokers can’t make a living because of the commissioned-based business.

Whenever your mortgage comes up for renewal, people who use mortgage brokers know it’s time for their broker to help them get another great mortgage. The value-added service and advice that brokers bring to their clients is that they help negotiate a new mortgage (possibly at another institution that has a more-competitive rate), normally at no cost.

If you find that you need to make adjustments to your mortgage, such as changing the amortization, mortgage amount, or you’re just moving to another house – a mortgage broker can help you with that too. 

We work with most chartered banks and wholesale mortgage lenders and can access just about any mortgage lender in Canada.

If you currently have a mortgage with a bank, and are looking for a second opinion – most mortgage brokers will set aside time to help you shop the mortgage market to get a better rate. We’ve found that normally upon mortgage renewals, financial institutions may not offer a competitive rate.

Keep in mind there’s more to a mortgage that just a rate. Often times the lowest mortgage rate means that you need to sacrifice pre-payment options, or pay hefty penalties should you need to make adjustments to the mortgage in the future. Mortgage brokers will help you identify the best mortgage out there that fits your financial needs and balances rates and features.

I'd love to hear how you make your own decisions on choosing a mortgage. Please e-mail me at lastovic.s@mortgagecentre.com or offer your comments. If you're on twitter follow me @Sandra_lastovic.

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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The hazards of waiting to buy your first home

Buy now or wait – the hazards of market timing and waiting to buy your first house

	Base Scenario	Scenario 1: Home prices stay the same Interest rates increase by 0.75%	Scenario 2: Home prices increase by 4% Interest rates increase by 0.75%	Scenario 3: Home prices decrease by 2% Interest rates increase by 0.5%
Home Price	$280,000	$280,000	$291,200	$274,400
Down payment	$14,000	$14,000	$14,560	$13720
Interest Rate	Current rate 3.5%	4.25%	4.25%	4.0%
Monthly Mortgage Payment	$1365	$1475	$1534	$1408

One of the most common questions I get is, “Should I wait to buy a home until I have more money saved?”

I think that good job stability and credit history are almost more important that having a significant down payment on a house. Job stability will give you the financial means to pay for the home expenses. Mortgage lenders are now conservative to whom they lend to. A good credit history is mandatory if you’re putting less than 20% as a down payment on your first house. And your credit history proves you can pay your financial obligations on time.

A home purchase is likely the largest financial purchase you will make in your life. As a mortgage professional, I’m programmed to take the financial approach. I’ve included a table to help explain why it makes sense for first-time home buyers to purchase now, rather than wait another year for a greater down payment.

Here’s the rational on buying a house now versus waiting a year for a greater down payment.

Most first-time homebuyers can purchase a decent condo or home for the price of $280,000. With $14,000 as a down payment (5%) the monthly mortgage payment will be approximately $1365.

Home prices are slated to go up in the next year. The average price increase over the last 40 years has been approximately 6% in Guelph. However, I’ll be conservative and estimate that home prices will increase by 4% in the next year. Assuming that mortgage rates increase by 0.75% in the year, the same house that you can buy today for $280,000 will be worth $291,200. This same purchase in the future will require another $560 more as a 5% down payment. The monthly mortgage payment will now be $1408 per month, because of the increase in mortgage rates for the future. In a year, the same house will cost $43 more per month in payments and an extra $560 more in a down payment.

In order to circumvent this issue, the borrower would need to put 10% as a down payment to get a similar mortgage payment. They will need to save an additional $15,100 more in a year, or about $1260 more per month over 12 months.

If you don’t have the 5% as a down payment, some good mortgage lenders are still offering mortgages with no-down payments.

Waiting another year to buy your first home can be costly. If you have good credit and job stability, be proactive with your financial future and purchase a home. More and more individuals are buying homes as single people too!

Please contact me if you have any questions about buying your first home. I can be reached at 519-763-3900 ext. 1001 or via e-mail at lastovic.s@mortgagecentre.com.

What does it mean when RBC lowers it's fixed-rate mortgages?

Driving to work today, I listened to CBC radio announce that RBC has, "quietly" reduced rates on it's fixed-rate mortgages. I listened with a smugness, since most wholesale mortgage lenders in Canada, had already lowered their rates. Those following the Canadian bond market have noticed a trend of lower yields, which directly impact fixed rate mortgages (see the chart below...thanks to the Bank of Canada for this information).

For consumers, it means that the bank's posted rates are decreasing by 0.10%, but when negotiating a mortgage rate directly with a bank, it's difficult to determine the lowest rate.  That's were we can help. As mortgage brokers we work to negotiate the best rates for you, in conjunction with the best features.

On a side-note, if you want to accelerate paying-off your mortgage in the next three years, you'll likely want to choose a variable-rate mortgage. Then you don't have to worry about what's happening in the bond market.

Please contact me directly at lastovic.s@mortgagecentre.com if you need help negotiating a better mortgage rate.

Government of Canada benchmark bond yields - 5 year

GRAPH PERIOD: 17 January 2013 - 17 January 2014

Date	Yield
2014-01-17	1.69
2014-01-16	1.71
2014-01-15	1.76
2014-01-14	1.76
2014-01-13	1.72

5-year fixed rates up by 10 bps

Some news for the New Year! Over the last few days most mortgage lenders have raised their five-year fixed rates up by 10 bps points and are priced on average at 3.69%. If you're buying a house or renewing a mortgage in the next 4 months ensure you re-lock your mortgage rate hold.

The pricing on variable-rate-mortgages remains the same at prime -.4% to prime -.5%.

Government of Canada benchmark bond yields - 5 year

GRAPH PERIOD: 28 December 2012 - 30 December 2013

Date	Yield
2013-12-30	1.92
2013-12-27	1.96
2013-12-26	NA
2013-12-25	NA
2013-12-24	1.90

What's up for 2014?

I’ve recently heard one of my favourite economists, Benjamin Tal of CIBC World Markets speak about the outlook for the global economy in 2014. How do world affairs affect the housing market? Global events impact people’s inflation expectations. Inflation has a direct impact on the bond market, which is correlated to fixed-rate mortgages. If rates go up, there is less demand for housing as the monthly carrying costs are higher. 

The overall mortgage rates message is relatively boring for 2014: low stable rates. However Benjamin Tal highlighted some interesting bits that are worth sharing:

•  2013 was a year in transition. There is real and sustainable recovery in the U.S. and the Canadian and the U.S. economy are still tied closely together. So as rates remain stable south of the border, they will also remain stable in Canada.

• There will be fewer first-time home buyers in 2014. Young people in Canada are more educated than ever before, but also less financially sound. Those graduating from college or university have higher student debt and lower income as compared to previous generations. The lift in the housing market for those homes appealing to “first-time buyers” will not be the same in the near future.

• Opportunities for real estate investing rest with properties that appeal to a younger demographic who can’t purchase a home, but want to rent a reasonably nice home or condo.

• The demographic trend for those who are 55 or up is easy to follow; investing in this market is a sound decision.

• Facebook and twitter are not driving forces in the economy and should be considered cautiously when long-term investing. However, technological innovations are a key factor in increasing productivity around the world. The U.S. continues to make great strides in this area, while Canada lags behind.

•  The consumer debt Canadians are acquiring through mortgage debt will continue to be a drag in the Canadian economy.

•  The increase in a bank’s prime rate isn’t forecast to move until the first quarter of 2015. This is significant for those who have variable rate mortgages.

It’s critical for those who work in the real estate industry to understand how the global economy affects the housing market. 

Whether you’re a client of a bank or mortgage brokerage, if you’re interested in reviewing your own home purchase or sale and how it will impact you financially please contact me by phone at 519-763-3900 ext. 1001 or via e-mail at lastovic.s@mortgagecentre.com.

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