30 Nov

Mortgage Rules Forever Changed

General

Posted by: Jonathan Barlow

Or rather, at least until they change again.

Today is the first day of implementation for the federal government’s new mortgage rules. As much as a few things have changed, much has not. In spite of the gloom and doom in the media, you can still get mortgage financing in Canada, relatively easily.

Based on the new rules, if you want to access mortgage funds, here’s what’s changed for you;

NOTHING.

That’s correct. Nothing has changed in terms of your access. The new rules mean that you may pay more in interest terms for a product that does not fit the insurance model ( investment properties and refinances are top of mind), but the funds are still accessible.

Certainly, if you are a first time homebuyer you are limited; if you need default insurance, you’re limited to purchasing a home with a maximum value of one million dollars. Think about that for a moment, with 10 percent down, that means mortgage payments of fifty thousand dollars a year.

For that same mortgage and again, only if you need insurance, the government also want you to afford a payment buffer of another $10000 a year. But what if something goes wrong? Shouldn’t you have that buffer?

So for you, nothing has changed.

For the Mortgage Professional you engage, it means they will have to sift through the myriad changes, speak to two or three lenders about your application and then find the financing best suited to you and your needs, balancing cost against flexibility.

Hey, wait a minute, that’s always been our job!

As always, if you have any questions, need help or would like to run through some scenarios, please call or email.

Regards,

JB

Jonathan Barlow
778-230-2572
jbarlow@dominionlending.ca

21 Nov

Do we truly understand the problem behind the new Vacancy Tax?

General

Posted by: Jonathan Barlow

Lots has already been written about Vancouver’s new Vacancy Tax, even while the ink is still drying on the bill. In my industry, not a lot of it has been positive. One writer is troubled about the tax being contrary to the idea that if you own, you should be able to do what you like with the property. Another has likened the move to the City taking another step down the road to becoming Big Brother.

As I read the the news reports and commentary from the blogosphere, the thing that strikes me is that nobody talks about the real problem for those of that live here, that having 10000 empty residences means. I’m not just talking about the rental shortages, although they are bad.

I’m talking about the one billion dollars not flowing in to the local economy from the families that are not calling Vancouver home. Think about it, if we assume an average family size of 3, that means 30,000 people are missing from our neighbourhoods all the time. That’s 5% of the population of the city of Vancouver. The consequences of that absence are far more meaningful when you consider them in addition to just the monetary consequence.  

Those people, our absentee neighbours, don’t;

-Volunteer at Crabtree Corner or the SPCA.
-Shop for groceries at Granville Island.
-Participate in community planning surveys.
-Champion the installation of speed bumps on your too busy street.
-Hang out with you and your dogs in the park on a sunny Sunday Afternoon.
-Vote in plebiscites or elections.
-Keep an eye on your place while you’re away on vacation.


Mortgage Professionals are fond of talking about homebuyers having “skin in the game”. I get that Vancouver is a highly desirable place to live and after 25 years of living here, think I see why it is, but if you want to own here but not be in the game, isn’t it reasonable for you to pay extra?

Home ownership shouldn’t just be an investment, it should be an investment in enriching your community.

As always, if you have any questions, need help or would like to run through some scenarios, please call or email.

Regards,

JB

Jonathan Barlow
778-230-2572
jbarlow@dominionlending.ca

15 Nov

Notice How We Always Talk About Rates?

General

Posted by: Jonathan Barlow

Rates are going UP!!! THE SKY IS FALLING!!!!

Rates are going DOWN!!!! TIME TO DO THE DANCE OF JOY!!!!

Both of these headlines are amusing but chances are you’ve seen both in a news article, a flyer or even in the blog of your favourite Mortgage Professional. We all do it, because fluctuating rates are attention grabbers, even more so than fluctuating gas prices.

I admit it, I can save you $40 dollars a month on your mortgage payment by getting you the best rate, but I’d really really like it if I could be guaranteed to grab as much attention with a headline like “ I SAVED THOUSANDS BY CHOOSING THE RIGHT MORTGAGE!”.

What ‘choo talking ‘bout, Willis????

Well, imagine you are 3 years in to a 5 year term on a $350,000 mortgage and something happens – you come into enough money to pay off the mortgage. Maybe, the value has increased enough that you can afford a stake in a newer bigger home for your growing family. Perhaps its even that you want to downsize, pull out all the available equity and be mortgage free.

All great reasons to pay off that mortgage and depending on the mortgage you’ve chosen, the early payout penalty can be as little as $1300 or as high as THIRTEEN THOUSAND DOLLARS.

Now wait just a minute, Willis! How the…?????

Its really a matter of whether or not you chose your mortgage, or if you let the bank choose for you, which is an easy thing to do when you’ve always gone to one financial institution for eveything.

You only really have choices when you get help from a Mortgage Professional, rather than going round the corner to the bank. When you get advice from a Mortgage Professional, you may end up back at your bank but at least you’ll have made that choice – while understanding all your options.

Just don’t be a Willis – know your options and save the most money you can.

As always, if you have any questions, need help or would like to run through some scenarios, please call or email.

Regards,

JB

Jonathan Barlow
778-230-2572
jbarlow@dominionlending.ca

1 Nov

Was it the Good Old Days or just Old Days

General

Posted by: Jonathan Barlow

With the recent change in qualifying rules, there’s been a lot of lamenting about the “good old days” of mortgage financing , before 2008.  Lots of the claims made are only partially true, at best, and have been written I suspect, by people who were not working in the field before 2008.

Lets look at three of the claims and clarify;

There was 100% financing available.
True, but only available for about eight months, by my recollection.
The government, realizing it had gone a step too far, removed this option as suddenly as it had provided the option.
There were 40 year amortizations.
True but again, only for a limited period of time.
Note also that most lenders still qualified you on a 25 year amortization, so if you couldn’t afford it at 25 years, you weren’t getting the 40 year amortization.
No limit set to your GDS (gross debt service) if your credit was strong enough.
True there was no government imposed limit but….
A credit principle common to most lenders is that you should spend no more than one third of your income on shelter payments. If you don’t have the income, then you need to have some form of cash ( mostly investments ) to back it up. What lender in their right mind is going to support a GDS of 50% if there isn’t evidence that you can somehow meet your obligations?

Because of economic change, both acceleration and slowdown, the products and services available to consumers will change, constantly. What seems like a good idea at the time may be errr, completely wrong headed. By way of an example, the government offered financing in the late ’70s and early ’80s in what was called a Graduated Payment Mortgage. Simply put, the payments on this 5% down mortgage were less than Principal and Interest for the first five years of the mortgage. Over the period they were offered rates rose to 21% ( thats  mortgage rate by the way). What seemed like a good idea at the time…

While I recognize the rule changes add some new challenges, its important to know we can be optimistic about our future home buying. Here’s three reasons to think we’re living in the “good old days” now;
a) We have the lowest Mortgage rates, ever.
b) In spite of the recent changes, we have some of the most flexible, comprehensive mortgage financing options in the world.
c) As a society, we believe that each person has a right to housing and our government recognizes and fosters that right.

As always if you have any questions or just want to chat, give me a call.

Regards,

JB

Jonathan Barlow
778-230-2572
jbarlow@dominionlending.ca