Category

Mortgage

Update on the Housing Market

By | Calgary, Jeremy Nagel, Mortgage, Real Estate | No Comments

Jeremy Nagel, your mortgage guru, here to give you a quick update on the market. Currently there is good news on two fronts.

First off, good news for consumers looking to get into the housing market. Especially for those looking into getting into the market today. Why is this? Let me break it down for you. Currently, the pressure is off interest rates, as bond yields fall to a two month low. At present, the 5-year bond yield has fallen below 1.60%, sending spread lower and bank profit margins higher. As my Fixe Rate Barometer depicts (image below), spreads are outside the comfort zone suggesting lower rates on the horizon. That said, I wouldn’t expect a fixed rate drop across the board at this point, however, it is possible that we will see lenders offering quick close specials to those clients looking for a quicker possession.

Second bit of good news is on the variable/adjustable rate side. Here we are seeing the spread sitting in the comfort zone at 1.56%. The dust has finally settled after the Octobers pause, on the heels of two back-to-back prime rate increases in July and September. After the recent comment made by the Bank of Canada’s (BOC) Stephen Poloz, it appears the markets have calmed in anticipation of no further BOC moves as we head into 2018. This is evident in my Adjustable Rate Barometer below. That said, market sentiment can change quickly, as we saw mere weeks prior to the July BOC increase that shocked the market.

Today’s interest rate market, in conjunction with the recent announcement of a “Stress Test” for all uninsured mortgages with less than 20% down payment (or equity in the home), has provided a great opportunity for both those looking to purchase and those looking to make changes to their current mortgage (renovations, debt consolidation, renewal, etc.).

For more information on this or if you are looking for some money saving strategies, give me a shout, 403.242.5547.

 

So, How’s the Market?

By | Calgary, Entrepreneur, Finance, Mortgage, Real Estate | No Comments

As you are probably aware Calgary is technically in a recession. But that doesn’t mean it is all doom and gloom! On this week’s episode, Kim sits down with Luke Azevedo (TV & Creative Industries Commissioner at Calgary Economic Development), Jeremy Nagel (our mortgage expert from Canada Mortgage Direct), and Doug Hayden (Real Estate Agent and Entrepreneur) to answer the question “So, how’s the market?”

What did the experts have to say? And what’s next for Calgary?

  1. Calgary is a dynamic city with worldwide appeal. Calgary gets top marks on several city ranking lists. We’re a clean city, with close proximity to the mountains (ahh), and we’re a great place for start-ups to grow and thrive. Our city attracts a wide variety of people, making us a truly dynamic city and great place to live.
  2. Opportunity for entrepreneurs to grow in this economy. The new announcement from CMHC (Canada Mortgage and Housing Corporation) came in and it’s looking good for entrepreneurs. CMHC is looking to help entrepreneurs enter the home buyers’ market, making it a great place to grow a business and make a life.
  3. Looking out for the next industry. To offset what is happening in energy sector, different industries are growing to diversify the economy; such as rocket space. Rocket space? You read that right, rocket space could be on the horizon for Calgary.

For the full discussion, tune in Wednesday November 15 on CTV2 at 8:30 a.m. Thank you to our experts!

Shopping for a Mortgage: Bank vs. Non-Bank Penalty

By | Calgary, Jeremy Nagel, Mortgage, Real Estate | 2 Comments

When shopping for a mortgage, the majority of consumers ask one question, what is your best rate? True, some ask questions beyond rate (as they should) but not all do, so I’m going to help the majority look beyond rate. What if you obtained the lowest possible five year fixed rate on day one but two years later the penalty is ten’s of thousands of dollars? Did you really get a great deal? Let’s investigate

Let’s say you have a mortgage with a balance of $375,500 and a five year fixed interest rate of 3.49% (which you have had for the past two years). Let’s pretend, for whatever reason, you decide to break the term of your contract. Maybe the reason is to take advantage of today’s lower interest rates, debt consolidation, or selling the existing home.

A standard IRD (Interest Rate Differential) penalty would look like this:

  • Mortgage balance = $375,500
  • Your contract five year fixed interest rate = 3.49%
  • Number of years remaining on your term = three years
  • Current three year mortgage rate (term closest to the term remaining) = 2.89%

Standard IRD Penalty = A x C x (B-D)
$375,500 x 3 x (3.49% – 2.89%) = $6,759
Standard IRD Penalty is $6,759

Standard IRD penalties are typically offered by non-bank lenders, are available through the mortgage broker channel, and are significantly different from that of a big bank IRD penalty calculation. Let’s look at a ‘Big Bank’ IRD penalty (I won’t mention which bank this is, but they are all similar).

Bank IRD penalty calculation:

First, we must determine your ‘discount’. To do this, we must look back in time to when you first took out your mortgage 2 years ago. What was the posted rate? If you can’t remember, it should be posted on your original mortgage document. If you still can’t find it, I would suggest you consult your bank representative. That same mortgage document should be a break down of the mortgage penalty calculation, but if it doesn’t, you can find the break down below.

Step One: Find the discount

The bank’s five year fixed posted interest rate = 5.59% (this is the posted rate at the time you took your mortgage out and your bank can let you know what it is). Your contract five year fixed interest rate = 3.49% (this is the rate you were given).

5.59% – 3.49% = 2.1%

Your discount (the difference between the posted rate and your contract rate) is 2.1%.

Step Two: Choose the term closest to the term remaining
To do this, visit your bank’s website to select the term and corresponding posted fixed rate. The bank’s five year fixed posted interest rate = 5.59% (this is the posted rate at the time you took your mortgage out and your bank can let you know what it is). Your contract five year fixed interest rate = 3.49% (this is the rate you were given).

5.59% – 3.49% = 2.1%

Your discount (the difference between the posted rate and your contract rate) is 2.1%.

Step Two: Choose the term closest to the term remaining
To do this, visit your bank’s website to select the term and corresponding posted fixed rate.

Step Three: The calculation

  • Mortgage balance = $375,500
  • Your contract five year fixed interest rate = 3.49%
  • Number of years remaining on your term = three years
  • Current three year mortgage rate (term closest to the term remaining)= 2.89%
  • Your discount (as determined above) = 2.1%
  • Current three year posted rate = 3.44%

Bank IRD penalty = A x C x (B-(F-E))
$375,500 x 3 x (3.49% – (3.44% – 2.1%))
$375,500 x 3 x  2.15% = $24,219.75
Your bank IRD penalty is = $24,219.75

What’s the average annual rate of interest, non-bank vs. big bank?

Bank

Average annual rate of interest: $375,500 x 3.49% = $13,104.95
IRD Penalty per year: $24,219.75 / 2 = $12,109.88

($13,104.95 + $12,109.88) / $375,500 = 6.72%

Average annual rate of interest: 6.72%

Non-bank

Average annual rate of interest: $375,500 x 3.49% = $13,104.95
IRD Penalty per year: $6,759 / 2 = $3,379.50

(13,104.95 + 3,379.50) / $375,500 = 4.39%

In the bank example, the lower the interest rate, the higher the discount. Which means the larger the penalty. Do your homework to avoid situations like this where your penalty can double, triple, or worse. It is estimated that between 60-70% of mortgage holders do not carry their mortgage to maturity. Make sure you are asking the right questions of your mortgage provider, bank, or broker. By virtue of the employee/employer relationship, it is difficult to receive unbiased advice from a big bank. My suggestion would be to speak with a mortgage broker, even if it’s for a second opinion.

Oh, and if dealing with a bank, ask the representative how they calculate their penalty. I bet they have no idea, which should be a red flag.

We are committed to helping Canadians save money and become mortgage free faster. To help you with asking the right questions, I have created a ‘Shopping Around’ questionnaire with five basic but very important questions.

If you are interested in learning more, I would encourage you to call us at 403.242.5547 or shoot me an email at jeremy@canadamortgagedirect.com.

How to Find the Right Agent for You

By | Calgary, Legal, Mortgage, Real Estate | No Comments

Whether you are on the hunt for a new home or in the process of selling your current home, finding the right agent is the all important first step. With so many choices, where do you begin? Together with our panel of experts, we’ve broken down the top things to consider and steps to take before hiring a real estate agent.

Interview your agent. When you hire an agent, you are entering a contract with them. How do they treat you during this process? Do they take the time to explain the details or rush you into signing? By observing how the agent handles this process, you can see how they will handle one of the biggest contracts you’ll be signing; the contract for your home.

Find someone who fits with your personality. Are you dry witted, light hearted, or to the point? Know who you are and who you get along with. You’ll be spending a lot of time with your agent, so make sure their personality fits with yours.

Find a good listener. Think of your agent as part therapist and part coach. You want an agent who will listen to you and understand what you want. A good agent will read the situation and come up with creative solutions to help keep you engaged in the process.

How involved are they in the community? You want an agent who cares about the community. Look for a real estate agent who actively volunteers and finds ways to give back to their community. Ask them who they support and why. This will help you get a better feel for who they are, what they stand for, and what inspires them.

Be upfront. Be clear in the beginning and let your agent know what you expect from them. What is at the top of your list of requirements? When do you like to be contacted and how? What’s the best time for you to see listings? You get the idea, make sure you’re clear and transparent so your agent know how to best work with you.

Ask the right questions. Take the time to ask your agent the right questions. Have you sold a home in my area? Do you know the market? Make sure your agent has a good track record and don’t be afraid to ask them to share this with you. Real estate agents should be happy to give up information and offer references.

Do I trust this real estate agent? Nobody is going to be perfect but you want to find someone who can provide you with the best experience possible. Ask family and friends for referrals to help get the process going.

Finding the right real estate agent is incredibly rewarding. This is someone who will help you make one of the biggest and most important purchases of your life. The right agent makes all the difference and gives you the best start in your new home.