What Affects Changes in Interest Rates

Posted on June 2, 2011 by Finder Financial

What Affects Changes in Interest Rates

Today I’m here to talk about interest rates and what makes them move up or down. So you might have noticed that the fixed mortgage rates recently have been going up and down like crazy while the variable rates have just stayed the same, no big change since the beginning of the year. Many of you might be thinking what’s the difference? Aren’t all interest rates at an all-time low, so they should all be heading upwards? On the other hand why aren’t the fixed and variable rates going up and down at the same time? Why is one so volatile and the other reasonably steady?

So we’ll discuss the difference between the two and where to find information regarding this. Fixed mortgage rates are actually based on what the bond market does. So if you think about a 5 year bond, if you invest in that, whatever that rate does, whether it goes up or down the 5 year fixed mortgage rate will follow. This also contributes to the volatility of the rate, since bond rates can change ever single day depending on what people want to invest in. For example if people feel like investing in anything else is insecure they’ll invest in bonds, therefore driving up bond rates and your 5 year mortgage rates will follow. This is applicable for all the varieties of bonds and corresponding mortgage rates on the market and all the individual changes will influence the 1-5 year mortgage rates.

Now the variable rate on the other hand is not based on the bonds at all, it’s actually based on the “Prime Lending Rate”. Each individual bank and lender will set their Prime Lending Rate (Basic Rate), they don’t just pick this number out of a hat, and they are actually based on what the Bank of Canada sets as their Prime Lending Rate. Now this means that the Bank of Canada is free to change this rate up and down, however they have the entire economy to think of, so they have goals of improving the economy and in addition any changes they make may impact the economy negatively, so they have to be very conscious of any changes that they make. Therefore the Prime Lending Rate is consistent and they’re thought out before anything happens. Usually there are a lot of indicators of when it will or will not change months before it does happen.

So if that’s of interest to you or if you want to know where to see the graphs and charts for each of these please feel free to contact us and we’ll be more than happy to help you out!

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How to Avoid Paying Penalties

Posted on May 3, 2011 by Finder Financial

How to Avoid Paying Penalties

Today I’m going to talk a little bit about mortgage planning. In particular how identifying your long and short term goals can save you money on your mortgage in the long run.

What brought this up was that there were a bunch of articles lately about some unfortunate people that had been hit with really hefty mortgage penalties, in some cases $20,000-$30,000. Now I’m not saying this will happen to you, however I want to bring to everyone’s attention sort of what I think went wrong in these cases; where people should have looked to avoid the situation in the first place, and also what they should have done later on to lower their penalties (mitigate the amount of money they had to pay out).

The main thing that I like to do with my clients is I like to pry into their financial plans and personal lives a little bit and find out what are their goals, what are their short term plans, what are their long term plans, are they expecting any children in the future, do they have any kids that are going off to school that they need to pay for, would they be retiring, are they upsizing or downsizing their property. All these things actually change your mortgage financing and if you’re caught unaware for example if you’ve taken a long 5 year mortgage and you need to change something after 2 years you might be susceptible to a large penalty because you were not prepared for it. It is always good to identify what is going to change in your life and plan your mortgage term around that. There’s always a good reason to take a 1 year mortgage, 2 year mortgage and so on. One of those reasons will be to fit your scenario perfectly.

If you are caught in a situation where you didn’t plan or you do have some unexpected expenses come up and for some reason you need to sell your property, talk with your mortgage broker and your mortgage planner before you rush out and do anything because there are things that we (they) can do, or advise they can give to mitigate your risk, and get your penalties under control. If that’s the situation you are in or you’re just curious or starting to look for your first home and you want to make sure you get the right mortgage for you then give us a call and we’ll be happy to work through it with you.

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Meetup! You’re Invited: Foreclosures, Estate Sales, Distressed Properties and More…

Posted on May 3, 2011 by jzchen

Finder Feed – Meetup! You’re Invited: Thursday, May 12, 2011.

Today we’re here to invite you to our next meetup on Thursday, May 12th. We are going to discuss how to buy properties below the market value.

We know a lot of you out there are interested in the real estate market, but since prices have started to go up again it’s more and more unaffordable to get that dream home that you really want. A lot of people are now focusing on properties where there might be some minor deficiencies or circumstances causing it to be listed below its potential value and you’re hoping to get a really good deal so you can really get that house you need.

We’re going to be inviting an expert speaker, John Houlihan, for this session. He’s going to share with you his experience on properties that are foreclosures, estate sales, distressed properties, and divorce sales. He will go through what these things are, how to find them, how to address them when you do when you come into contact with them, what are the procedures of putting in an offer into getting one of these properties, but most importantly, what are the risked involved; what sorts of questions you need to ask and what to look out for so you don’t end up with the lemon.

Foreclosures, Estate Sales, Distressed Properties and More…
Thursday, May 12, 2011
2nd Floor – 3012 Boundary Road Burnaby, BC

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Locking-in Your Mortgage Rate Might Not Save the Day

Posted on April 28, 2011 by Finder Financial

Finder Feed – Locking-in Your Mortgage Rate Might Not Save the Day

Today we’re going to quickly go over variable rate mortgages and the convertibility or “lock-in” feature that you get with most variable rate mortgages. I personally am a huge fan of variable rates and I would take a variable mortgage myself, however I find that a lot of people who are considering a variable are actually considering it for the wrong reasons and the convertibility feature is the main one.

In a variable mortgage, as you know, the rate will go up and down with the prime rate changes meaning every month you could be paying more or less. This uncertainty means that in the future you might be paying more than you started out with and if you don’t have more income or you have been spending all of your savings you might get yourself in a bit of trouble. Here’s where the convertibility feature comes into, supposedly, save the day, you can lock your mortgage into a fixed rate at any time with no penalty. This seems to be perfect, but there are two issues with this is:

  1. You’re wasting all of your savings. – if you’re going to take a variable rate it is a really long term strategy you have to make sure you have enough money or income coming in to pay for the mortgage as your payments increase because over the long term, based on many studies, in 90% of the cases you will come out ahead versus if you had taken a fixed rate.
  2. The fixed rate you are going to receive when you decide to convert is most likely going to be higher or worse than had you just taken a fixed rate right from the beginning. There are several reasons for this; mortgage rates right now are almost at an all time low so there’s no reason not to take a fixed rate if you don’t like the risk. Secondly you’ll lose any kind of incentive, you are already committed with that particular lender and they don’t really have any incentive to give you any extra discounts if you decide to now take a fix rate from them because you still probably have 2-3 years left on your contract. Again more savings are going down the drain.

So if you’re thinking about it and you’re not sure if you’re looking at variable rates the right way talk with your mortgage broker or give us a call today!

Posted in Mortgage Tips, Personal Finances, Rates | Leave a comment

Good-bye 35 Year Amortization?

Posted on April 28, 2011 by Finder Financial

Finder Feed – Good-bye 35 Year Amortization?

Today we’re going to talk about the 35 year amortization; the end of it and where you might be able to still find it. March 18th is officially the end of the 35 year amortization. For those who have watched our previous blogs, this is for people who have less than 20% downpayment, you will now be unable to get a 35 year amortization. This means you might not be able to qualify for a large of a mortgage as you wanted which results in purchase price that is now smaller than what you originally thought. You might also be paying more every month for your mortgage than you originally budgeted so it might impact you quite severely.

For those of you who still want a 35 year amortization, if you got more than a 20% downpayment, it is still available if you know where to look. Most the large banks have already said they will not have 35 year amortization, but some non-bank lenders and financial institutions still have it available. It may be in your best interest to still look for one because it may help you cash flow your mortgage and your property better. With a little more downpayment you might be able to qualify for a larger mortgage and the benefits go on from there.

Definitely talk to your mortgage broker about this and decide if it’s really right for you and if you don’t know who to talk to call us here at Finder Financial Services and we’ll be able to help you out.

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Trade-off: Rising Mortgage Rates and Falling Home Prices

Posted on April 28, 2011 by Finder Financial

Finder Feed – Trade-off: Rising Mortgage Rates and Falling Home Prices

Today we are going to discuss the trade-off between rising mortgage rates and falling home prices.  We know a lot of you want to buy a home, and have dreams of home ownership, maybe a year down the line or maybe more than that. You are hoping home prices will fall so you can afford to buy a bigger place, so you get more value for your money.

We came across this Globe and Mail article where an analyst looked into this situation and he actually found out that in most scenarios you will end up coming out behind!  The reason for this is that a higher mortgage rate would actually end up eating up all your savings.  Per month your mortgage payments would still end up costing you more because of a higher interest rate and if you had to deal with that higher interest rate to begin with you would qualify for a smaller mortgage amount and a smaller purchase price, so you might not even be looking at the same properties that you are looking at right now.

This might be of concern to you, if you have time we encourage you to speak with your mortgage broker and your REALTOR® to see if your financial strategy is appropriate, and also if this plan is appropriate for the area you are looking in because you are counting on home prices falling, which may not happen.

If you have any questions for us please feel free to give us a call or email us at 1-866-924-5244 or email us at info@finderfin.com.

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CMHC Rule Changes – Refinancing Limit

Posted on April 28, 2011 by Finder Financial

Finder Feed – CMHC Rule Changes – Refinancing Limit

Today we’re going to finish up our series about the CMHC rule changes.  The last topic we are going to cover is the refiniancing limit.  You may know that the refinancing limit will be decreased from 90% to 85% of your home’s value and that takes place March 18, 2011.

What this means for you is that if you are considering refinancing and pulling out some of the funds from the equity of your home then you may be limited in what you think you can draw out.  So if you were planning to renovate, get a car, or anything like that the limit is 85% of your home’s value.  That 85% is going to include your current mortgage balance, so what you still owe on the mortgage, any lines of credit that are secured to the property, and then everything you are trying to take out in excess of that.  All of those things combined now cannot be in excess of 85% of the current value of your property.

If you are looking to purchase a property, don’t worry, you’re still allowed to purchase using only 5% downpayment with CMHC or mortgage loan insurance, however it just means that you will not be allowed to refinance your mortgage in the future until you have paid off a certain amount on your mortgage or your property has appreciated so significantly in value that your mortgage is now less than 85% of the total value of your property.

If you wanted to speak to a mortgage coordinator prior to the deadline (March 18, 2011), give us a call or email us at1-866-924-5244 or info@finderfin.com.

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CMHC Rule Changes – Home Equity Line of Credit

Posted on April 28, 2011 by Finder Financial

Finder Feed – CMHC Rule Changes – Home Equity Line of Credit

Today we’re here to talk about home equity lines of credit and the new CMHC changes announced earlier this week.

A home equity credit is a credit line, think of something similar to your credit card, but secured to your property.  What this means is that you can borrow a very large sum of money because your property itself is worth hundreds and thousands of dollars.  You could borrow this money at a very cheap rate similar to mortgage rates.  Compared to your credit card, which might be 20% or even higher, this seems like a fantastic deal.

Now the problem is that the growth of home equity lines of credits has nearly doubled the growth of consumer debt.  The government obviously sees this as an area of concern.  We know that many of you may be using your home equity lines of credit in a perfectly reasonable way; maybe you’re renovating, of just keeping it as an emergency fund, however the concern is still there that there might be people using it as easy access free cash that they can spend (this is something that the government does not want).

By withdrawing insurance for home equity lines of credit, essentially it limits the amount of money you can draw from line of credit compared to your property value.  So you may have previously been able to take out and borrow past 90% of your property value now you won’t be able to go past 80%. So it’s a good thing, most of you might not need that much in funds, however for those of you who might be already mortgaged pretty significantly it will limit the amount of extra funds you may take out of your property.

If you have any questions of concerns about these recent mortgage rule changes please feel free to contact one of our mortgage coordinators at info@finderfin.com or 1-866-521-9557

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CMHC Rule Changes – Amortization Periods

Posted on April 28, 2011 by Finder Financial

Finder Feed – CMHC Rule Changes – Amortization Periods

Today we’re going to talk about the CMHC mortgage rule changes which were announced yesterday.

The first item on the list was amortization periods.  For higher ratio mortgages the maximum amortization you use to be able to get was 35 years , and now they are going to limit it down to 30 years.

So we thought we’d break this down for you guys and let you know what this difference really adds up to.  If you think about a $275,000 mortgage, just a nice small mortgage amount, the difference between a 30 and a 35 year amortization is almost $100 dollars more per month on your mortgage payments.

BUT there is a good side to this!  Now you are going to be able to pay off your mortgage 5 years sooner and you will end up paying less interest on your debts.  So the shorter your amortization the more principle of your mortgage you are paying off.

So if this is still confusing to you, or when these changes are coming into effect, or if you can do something to avoid these rule changes or how to plan for it in the future contact us today at 1-866-924-5244 or at info@finderfin.com!  Stay tuned next time as we talk more about the new CMHC rule changes.

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