Bridge financing could have saved the day last month when a series of disasters on closing day caused three related real estate deals to fall apart.  

When a bank pulled the financing  from one buyer at the last minute, it caused all the deals to fall apart because  each one was contingent on the previous seller getting the money to close their  own sale. This is what real estate lawyers refer to as a train wreck.  

If  bridge financing had been used, it’s likely that this could have all been  avoided. In a typical bridge situation, the buyer closes their purchase a few  days before their sale. They go to their bank and ask for a loan, to pay for the  entire purchase, with the understanding they will repay the loan as soon as  their sale closes. The interest is usually prime plus 3% or 4% per day. By  closing a few days early, the interest cost is typically $100 to  $200.  

One of the benefits of closing a few days early is that you can slowly move into your new home. I have heard plenty of stories where buyers are moving out and moving in on the same day and while they are packed up at 1PM, they cannot get into the new home until after 6PM, resulting in additional moving costs, since you typically pay by the hour.  

Click here for the full article in The Star.

“Call Cory for a FREE second opinion on your Mortgage”

-Cory Kline- Mortgage Planning since 1998

Neighbourhood Dominion Lending Centres (705-794-1283 or Cory@ndlc.ca)

Fixed mortgage rates have been on a steady ascent since bond yields blasted off in May. Now, the major banks are jacking up rates again.

Most of the Big 6 are lifting their “Special offer” 5-year fixed mortgages to 3.79% or 3.89%, a 20 basis point hike. 

Royal Bank also announced a 20 bps hike in its 5-year posted rate, which rises to 5.34% on Thursday. If a few more banks follow RBC’s lead, the benchmark qualifying rate will rise accordingly. That would mark the first increase in the benchmark rate in more than 500 days (since April 2012).

A higher benchmark rate makes it tougher to qualify for a variable, HELOC or  1- to 4-year fixed term. (Mind you, one 20 bps hike is not as impactful as dramatized headlines like this suggest.)

A 20 bps jump in the qualifying rate means a household at the edge of affordability would need ~$1,100 more income to get a variable-rate mortgage on  a $300,000 house with 5% down.*

Looking back to May 1, 2013 is more telling. Since then, a 5-year fixed mortgage payment on that same $300,000 house has risen about $120 a month to ~$1,475. That kind of payment change is a potential source of financial  “difficulty” for less than 1 in 10 mortgage holders—if past CAAMP surveys are a guide. Note that “difficulty” does not imply default.

Naturally, all these incremental rate hikes can add up and decelerate home sales. But based on past consumer surveys, it could take a good point and a half rate-bump to curtail buying decisions in meaningful ways. At the moment, we’re only halfway there.

Click here to read more from Canadian Mortgage Trends

“Call Cory for a FREE second opinion on your Mortgage”

-Cory Kline

Neighbourhood Dominion Lending Centres (705-794-1283 or Cory@ndlc.ca)

When news broke last week about CMHC limiting securitization guarantees, it was commonly viewed as a new attempt by Ottawa to clamp down on mortgages. In fact, it was an old attempt.

The $85-billion MBS guarantee limit (the one that made headlines on Tuesday) was actually established earlier this year by CMHC and the Department of Finance. CMHC says it chose that number ($85B) based on “past issuance activity and projected funding needs of issuers (i.e., lenders).”  

In calling around, we finally found a few industry insiders who had actually heard about this $85-billion cap before last week. It is probably the
least publicized significant mortgage policy in the nation. Here’s some background on it, and why it matters…

CMHC says that, as of January 1, 2013, “Pursuant to legislative amendments to the National Housing Act introduced in Budget 2012, approval of the Minister of Finance is required for securitization guarantees…Therefore limits set by the Minister were applied starting this year.”

But why is a 2013 $85-billion limit needed when the government already imposes a $600-billion overall guarantee limit?

“The $85 billion limit applies to NHA MBS issued in the year and is an important oversight mechanism to manage housing market risks and the Government’s exposure to the housing sector,” CMHC states. “The $600 billion guarantee limit is set in statute and is an aggregate limit that applies to all outstanding securitization guarantees.”

If you recall from last week, it was unexpected growth in demand for market NHA MBS which led to its rationing (of $350 million per issuer). Or as analyst John Reucassel put it in a BMO report last week: “While there has been some speculation that this change was designed to influence the housing market and mortgage funding, we believe this change is more related to capacity.”

He adds, “These changes are unlikely to have a material impact on the banks’ financial performance; however, they may modestly alter funding, liquidity, capital and leverage decisions.”

In addition, mortgage rates may go up…a little.

But those rate increases are more linked to regulatory constraints (like liquidity requirements) than to investors demanding higher spreads in the open market. The reason: Many banks are using the government’s NHA MBS guarantee simply as a “wrapper – but not actually selling the mortgages,” said Darko Mihelic in a Cormark Securities report last week.

“…Because they are not selling the newly wrapped pool(s) [the wrappers have] not directly helped via lower funding costs.” In other words, some banks are using these NHA MBS guarantees (wrappers) primarily for capital and liquidity reasons.

TD is a prime example, having securitized $41.2 billion of mortgages and kept them on its balance sheet (Source: Cormark). That’s a 55% increase in two years.

TD is just one of the big banks doing this, so you can see how demand for these government guarantees might have “snuck up” on regulators, leading to last week’s announcement. In short, this is not a new move by Finance Minister Jim Flaherty & Co. to derail housing.

Source: Rob McLister, CMT

Cory Kline (705-794-1283 or Cory@ndlc.ca)

Mortgage planning since 1998.                                                                                                                                                                                                                             Mortgage Agent at Neighbourhood DLC, FSCO Lic#M09001239, Head Office:1140 Stellar Drive, Newmarket, ON, L3Y7B7, FSCO LIC#11764,Independently Owned and Operated

“Call for a Free second opinion on your mortgage”

Full Article:

Article from Canadian Finance Blog, Written by: Alan Schram

For the most part, I think Canadians have the advantage over Americans. Our housing economy didn’t crash (completely), our banks don’t appear to be failing, and medical care is downright affordable. Everyone knows that they should be checking their credit report. A credit report is very, very important when it comes to maintaining your financial health.

Checking your credit report will allow you to quickly and efficiently challenge incorrect reports, find potential identity theft, and ensure that financial institutions give you the best deal possible when doing business. Not checking your credit report is like never going to the dentist. You may not feel like you have a problem, but if you wake up one day with a tooth ache you’ll wish you did some basic maintenance rather than a massive root canal.

How to get a free credit report in Canada

The two reporting agencies are Equifax and TransUnion Canada. You can get a free credit report from Equifax by filling out the form found here.  You must print this report, fill it out, photocopy the necessary identification, and mail/fax it all off to Quebec. Once it is received, they will mail it back to you in a couple of weeks. TransUnion Canada is similar. A mailable form is found here.

TransUnion Canada does offer another way of getting your free credit report – and that is by phone. I just did this, and I would highly suggest it to anyone that wants to get their credit report but is too lazy to print out a form and fill it out. It took me 5 minutes and 56 seconds to follow the phone prompts, and I believe I passed because one of the many robotic automated voices told me that I should receive a credit report within 3 to 5 business days.  As long as you know your SIN #, Credit Card #, and some basic financial information about yourself (last place you applied for credit, current credit cards/loans/bank accounts, how old you are) then you should be able to quickly and easily obtain a credit report.

I would suggest getting one report every 6 months. That spreads it out enough so that you should be able to catch anything major before you apply for a mortgage or a credit increase.

When was the last time you checked your credit report?

If you have any questions about your credit please give us a call, we are here to help!

Cory Kline (705-794-1283 or Cory@ndlc.ca)

Mortgage planning since 1998.                                                                                                                                                                                                                              Mortgage Agent at Neighbourhood DLC, FSCO Lic#M09001239, Head Office:1140 Stellar Drive, Newmarket, ON, L3Y7B7, FSCO LIC#11764,Independently Owned and Operated

“Call for a Free second opinion on your mortgage”