Why Choose a Mortgage Broker Over a Bank in 2024: The Smart Mortgage Guide

In today's dynamic real estate market, finding the right mortgage to suit your needs is more critical than ever. With economic conditions and interest rates constantly evolving, it can be challenging to navigate the labyrinth of mortgage options available. This is where a seasoned mortgage broker comes to your rescue. In 2024, here are compelling reasons why you should opt for a mortgage broker over going directly to a bank: 

 1. Unbiased Expertise: Mortgage brokers are your personal financial consultants, working solely in your best interest. They have access to a wide array of lenders, including major banks, credit unions, and alternative lenders. Their role is to identify the mortgage that aligns perfectly with your unique financial situation, not to sell you a bank's mortgage product. 

2. A Diverse Lender Network: While banks are limited to offering their in-house products, mortgage brokers have a vast network of lenders to choose from. They can source mortgages with terms, rates, and conditions that cater to your specific requirements, ensuring you get the best deal possible. 

3. Customized Solutions: Every homebuyer is different, with distinct financial situations and goals. A mortgage broker tailors mortgage solutions to your needs. Whether you're a first-time homebuyer, looking to refinance, or seeking an investment property loan, they will craft a mortgage that suits you perfectly. 

4. Time and Money Savings: Mortgage brokers are experts in streamlining the mortgage application process. They know the industry inside out and can expedite the approval process, potentially saving you weeks of waiting. Moreover, they often secure more favorable rates and terms, resulting in long-term financial savings. 

5. Independent Guidance: A mortgage broker acts as your financial advocate, ensuring you understand the terms and conditions of your mortgage agreement. They'll provide valuable insights and answer your questions, empowering you to make informed decisions. 

6. Eliminate the Guesswork: Navigating the complex mortgage landscape can be overwhelming. Mortgage brokers simplify the process by providing you with straightforward information and presenting the best mortgage options available. 

7. Access to Exclusive Deals: Brokers often have access to exclusive mortgage deals and promotions that are not available directly through banks. These offers can translate into substantial savings on your mortgage. 

8. Peace of Mind: Buying a home is one of the most significant financial decisions you'll make. With a mortgage broker by your side, you can have confidence that you're making the right choice for your financial future. 

 In 2024, the Canadian real estate market continues to evolve, and so do the intricacies of mortgage options. A trusted mortgage broker is your ally, simplifying the process, saving you time and money, and ensuring that you secure the best possible mortgage for your unique situation. When it comes to mortgage expertise, personalized solutions, and unbiased advice, choosing a mortgage broker is the smart homebuyer's choice. 

A fresh look at the opportunities in today’s housing market

When news reports present a consistently gloomy view of rising rates and the distinctly negative impact on the housing market, it’s easy to feel discouraged. But the news frequently doesn’t tell the full story, especially when it comes to the opportunities presented by uncertain times. Historical evidence indicates that for most Canadians, a housing market investment remains the most important wealth-creation decision they will ever make, providing a resilient foundation with leveraging opportunity to build out a strong portfolio.

How it stacks up

The Bank of Canada’s most recent rate increase of 0.75% markedly slowed the housing market. With speculation of more rate hikes to follow, fewer properties are available and potential buyers are very carefully considering where and when to invest. Simultaneously, a shortage of rental units has driven up rental prices and has potential renters clamouring for fewer units. In just 13 months, rental rates have increased by a whopping 16.8%, including a 13% increase for single family homes, 7% for condos and 5.5% for apartments. As demand for rental units continues to surge, the upward trend for average rent prices is likely to continue, creating an opportunity for those wishing to expand an existing portfolio of rental properties, and for first-time rental property investors.

Why now?

Compared to just a few months ago, rental properties may be available at lower prices, and expected cash flow from rental investments may be higher. The currently slower market also provides more time for investors to find the right rental property at the right price, and to carefully consider financing options in alignment with their personal wealth-building goals.

For existing homeowners feeling the pinch of rising rates and inflation, it’s also a uniquely opportune time to consider creating a rental property within their own home. Compared to a year ago, it’s relatively easy to find qualified tenants who are willing to pay higher rental rates for in-home apartments, resulting in potentially increased positive cash flow, with lower effort for the homeowner.

Customized financing

Whether you’re interested in a new home, a rental property or a renovation to create or upgrade rental units, mortgage restructuring can help mitigate the challenges of cost-of-living increases while enabling you to achieve your goals. I look forward to customizing a mortgage solution that helps you take advantage of these opportunities.

Hold that rate!

The next Bank of Canada interest rate announcement is a few weeks away and another rate increase is widely anticipated. If you’re considering a rental property purchase or a renovation to create a rental suite in your home, a pre-approval is a smart first step. You’ll have a better understanding of what you can afford and you’ll also get a rate hold for up to 120 days which means you’re protected from possible rate increases.

A look at how rate increases impact different mortgage types

With inflation at its highest level in almost 40 years, the Bank of Canada continues to take drastic action to cool the economy with the latest of five consecutive rate increases announced on September 7. Rising interest rates impact everyone with a mortgage but how and when you will see the impact depends on the type of mortgage you have. We often classify mortgages as either fixed-rate or variable-rate. What may not be commonly understood is that there are actually two types of variable-rate mortgages– adjustable payment and fixed payment – and the impact of rising rates on these two types is dramatically different. Here's a look at how each mortgage type is affected:

Fixed-rate

Many Canadians choose a fixed-rate mortgage specifically for the peace of mind that comes from knowing exactly what their rate and payment will be for the duration of their mortgage term. Fixed-rate clients don't have to be concerned with rate fluctuations until renewal time or if they are considering refinancing. Many fixed-rate customers will be faced with the prospect of renewing at a higher rate but for now, the rate increases will have no immediate effect on their mortgage.

Variable-rate with adjustable payment

If you have this type of mortgage, you likely have already felt the impact of rising rates with incremental increases in your mortgage payment over the last several months. The good news is that the higher payment means you are continuing to pay down your mortgage at the same pace and your amortization won't be adversely affected. If the higher monthly payments are beginning to cause a cashflow concern, get in touch for a review of your situation and we can discuss some options that will work for you.

Variable-rate with fixed payment

Variable-rate mortgages with a fixed payment also have a fluctuating rate which increases or decreases with prime, but unlike adjustable payment mortgages, your mortgage payment remains consistent. This certainly makes life easier from a budgeting standpoint but when rates increase, a greater portion of your payment is allocated to interest and less toward principal. If rates climb high enough, you may eventually hit what's called the "trigger rate".

What is a trigger rate?

A trigger rate is the rate at which the allocation of your payment is 100% interest and 0% principal. At this point, your lender may suggest increasing your monthly payments or converting to a fixed-rate mortgage. Although you are generally not obliged to take immediate action, any interest not covered by your monthly payment will be added to your principal. And when the balance outstanding reaches your original loan amount, you hit your trigger point. You will then be required to take action by making a lump-sum payment, converting to a fixed-rate mortgage, or increasing your monthly payment. If you receive a notification from your lender, be sure to reach out to review your options before responding.

How do I find my trigger rate?

Your trigger rate will depend on your balance outstanding, your current monthly payment and your repayment schedule. Formulas will vary by financial institution. If you'd like to know what your trigger rate is, feel free to get in touch.

Think you may hit your trigger rate soon? Want to discuss your options if you do? I am just a phone call away. Please reach out anytime – I'm here to help.

The Tax-Free Home Savings Account Explained

If you or someone you know is saving for a down payment on their first home, the Federal government announced a new program aimed at first-time buyers in their recent budget. The First Home Savings Account combines the features of an RRSP and TFSA to give prospective homeowners some tax relief and a boost toward their homeownership goals.

Here are the highlights:

• Account holders can contribute up to $8,000 annually, up to a lifetime maximum of $40,000.

• Just like an RRSP, contributions made to an FHSA are tax deductible.

• Like a TFSA, funds can be withdrawn from an FHSA tax-free – provided the funds are used for a home purchase.

• Funds in an FHSA can be invested in allowable (not yet disclosed by the government) investment assets such as stocks, bonds, mutual funds, etc. and any growth/income from these investments are not taxable.

• Transfers can be made from an RRSP to an FHSA but are subject to the annual contribution limit of $8,000. However, when money is transferred from an RRSP to an FHSA there is no adjustment to available RRSP contribution room.

• Transfers can be made from an FHSA to an RRSP or RRIF if not purchasing a home and this will not affect RRSP contribution room – essentially giving qualified account holders an additional $40,000 in RRSP contribution room.

For those who are in the saving stage of their homebuying journey, there is no downside to the FHSA as a savings vehicle. You'll get the tax deduction on contributions, like an RRSP, and the tax-free growth and withdrawal of funds when it's time to purchase a home. If the home purchase doesn't materialize, funds can be transferred to an RRSP or RRIF tax-free and added to a retirement nest egg.

The FHSA does not replace the existing RRSP Home Buyer's Plan but provides another tax-advantaged home-savings opportunity for Canadians buying their first home. The two programs cannot be used in tandem. Unlike the RRSP Home Buyer's Plan, however, the FHSA does not require that funds withdrawn from the account be repaid.

The First Home Savings Account is expected to be up and running sometime in 2023. There are numerous eligibility requirements, and rules and conditions and I would be happy to explain the details to you – if this is something you think you'd like to take advantage of.

It's RRSP season. Why is this important to you as a homeowner?

The deadline to contribute to your RRSP this year is March 1. Your home may be the perfect tool to pay yourself first and grow your net worth.

Many homeowners feel caught between competing financial priorities – paying down their mortgage and keeping up with monthly bills often means retirement savings take a back seat. With the right plan in place, it may be possible to simplify your debt, reduce interest costs, and save for retirement.

In 2021 the average house price in Canada increased almost 18%. Tapping into the unused equity in your home is an effective way to save money and grow your net worth. Here are a few ways to make this happen:

• If there is enough equity in your home, you can borrow to invest in your RRSP if you have the contribution room.

• Consolidate your high-interest debt such as credit cards, car loans and other consumer obligations and roll it into a low-interest mortgage. Very often, this strategy has a dramatic positive effect on monthly cashflow, and by reducing the number of payments you have to manage each month, makes life simpler – and who doesn't love that?

• Combine your mortgage refinance with a pre-authorized monthly contribution to your RRSP, and watch your retirement savings grow! For instance, let's say you saved $750 a month by refinancing your mortgage and paying out other debt. If you took $500 of that $750 and invested it each month, that's $6,000 closer to your goal each year. If you invest $6,000 each year for 20 years, with a rate of return of 4%, adjusted for inflation*, you'll have $193,385 saved for retirement! And by setting up a monthly contribution schedule, by the time the RRSP contribution deadline comes along next year, you'll have a sizeable contribution already.

For some homeowners, this is a great way to save more and pay less – not only can you make your monthly debt payment smaller and save on interest, you also save for retirement—all in one! Manage your debt, save more for retirement, and enjoy a new financial life. we would love to help you crunch some numbers and assess your situation.

*Assuming an inflation rate of 2% per year.

Sensible strategies to help you thrive in 2022

Canadians keep talking about the housing market! Are we in a housing bubble, will rates rise in 2022 and by how much, is this the right time to buy or refinance, is a lender’s renewal offer the best available, and on and on! For many, it feels like some uncertain times ahead. Often, it’s just a few sensible strategies that can help you thrive in the current climate. Here are my top tips for the year ahead:

1.      Take care of your credit. It’s so important to have good credit behaviors so you always qualify for the best mortgage rate. Pay your bills on time. Don’t let your credit accounts exceed 30% of the credit available. Before you cancel any credit cards, get advice. And don’t apply for a store card just to save on your purchase that day!

2.      Get advice before locking in your variable mortgage. It will take several prime rate increases for variable rates to be on par with a fixed rate, and you are likely better off sticking with your original strategy of focusing on payment vs. rate. Get in touch if you want to discuss the best strategy for your situation.

3.      Consider a refinance if it makes sense. Whatever your need might be – paying down high-interest debt, renovations, helping a child buy a home, you may want to refinance your mortgage and take advantage of rates that likely won’t be around too much longer. I can complete an analysis to help you determine whether it makes sense for you.

4.      Speed up your mortgage pay-down. Change from monthly payments to accelerated weekly or accelerated biweekly, which increases your number of payments and takes years off your mortgage. Also consider putting found money like raises and tax refunds against your mortgage principal. Check your mortgage contract for the amount you can prepay each year. If you can increase your payment amount, you’ll be accustomed to paying the higher amount should rates be higher at renewal.

5.      Renew with your eyes open. When your lender sends out a letter suggesting you renew your mortgage at their current offer, that’s a signal to get in touch. This is your opportunity to negotiate the best possible deal!

6.      Get a pre-approval. A preapproval will tell you how much you qualify for, what your mortgage payments will be, and you’ll get an interest rate that will be held for up to 120 days so you are protected should rates rise. If you are house shopping, you won’t fall in love with a home you can’t afford, and you cab act quickly when you find your dream home. Pre-approvals also make sense for renewals and refinances when rates are rising.

7.      Let renters help pay your mortgage. A home with a rental suite can be a great option for homebuyers, especially if the area you love is pricey or you don’t want to buy a condo at a lower cost. It’s also a great option for existing homeowners looking to lower their mortgage payments.

8.      Don’t neglect your savings. In managing debt, you want to make sure you don’t need to use credit to get you through a financial emergency when your car breaks down or your washing machine quits. Make a point of setting aside a small sum every paycheque into a special emergency fund. Having a budget can provide the discipline you need. It might not be the most thrilling task, but it’s one that will give you a clearer picture of where you stand and how much you can truly spend.

New year and a new chance to make sure your mortgage plan is helping you build wealth and thrive! Get in touch at any time for a discussion on your best mortgage strategy.

Preparing for higher interest rates

Given inflationary pressures, the Bank of Canada indicated in their last rate announcement that rate hikes could take place earlier than previously indicated, in mid-2022, which means variable rates that rise and fall in tandem with the key rate will start climbing. Views among economists vary as to how many hikes we’ll see in 2022 and 2023 because no one really knows whether inflation is truly transitory given supply chain issues, or even if it won’t be a long-term issue at all.

Keep in mind that even with the projected increases, we’ll still be in an ultra-low-rate environment and an incredibly stable market. We’ve also seen increases before to only see them decrease again. But rates will likely rise, so here are answers to the questions I’m getting:

What is the impact on my current mortgage? With variable rate mortgages, as rates rise so too will be the amount of interest you pay. While your payment often doesn’t increase, you’ll pay less principal and more interest. Fixed-rate mortgages - which are based on the bond market – have already been trending slightly upward, although if you have a fixed mortgage, you aren’t affected until it’s time to renew. Consider taking advantage of your prepayment privileges and increase your payment so at renewal, you are accustomed to paying the higher amount.

Should I refinance now? Many have already taken advantage of low covid mortgage rates to refinance their current mortgage to get a lower rate, for debt consolidation, renovations, or to help a child buy a home. If you feel this is a good opportunity and want to access these low rates that won’t be around too much longer, please get in touch for an analysis of whether it makes sense for you.

Should I lock in my variable rate mortgage? A key question to consider is - why pay more money than you have to? It will take several prime rate increases for variable rates to be on par with a fixed rate, and you are likely better off sticking with your original strategy of focusing on payment vs. rate. Preparing for higher rates is different than locking in. You can prepare by increasing your payment amount if your budget allows, so you are paying down more principal and building a buffer for later.

But if it’s going to keep you awake at night then let’s talk about your conversion options. Remember though, you should be confident you’ll stay in a 5-year fixed mortgage for the entire term. Breaking a fixed mortgage can result in some onerous penalties. If you aren’t sure you’ll stay in the mortgage for 5 years, the interest rate risk of a variable mortgage may be a better option than the penalty risk of breaking a fixed mortgage.

What if my mortgage is coming up for renewal? Don’t feel rushed or pressured by a renewal letter or call. Let’s discuss your options. We’ll review your renewal offer together and I’ll shop around to see if it’s really the best deal available. Do you have too much other debt? This may be the time to roll it into a new mortgage to boost cash flow and save on interest costs.

Should I jump into the market now? The prospect of higher rates could cause a sense of urgency among homebuyers to get their mortgages before those increases take place. My advice is always the same: buy when you are financially ready. Don’t jump the gun just because rates “may” go higher. But, if you’re thinking about buying, I can arrange a pre-approval, so you’re protected from rate increases for up to 120 days while you shop around.

Should we talk? Yes for sure. You should have confidence in your mortgage plan and that’s why professional mortgage advice is so critical.  I have access to a wide range of lenders and know the right questions to ask to assess your situation and make sure you have the best mortgage strategy for whatever is ahead.

How Many Mortgage Quotes Should I Get?

You don't have to worry about getting rate quotes when you work with a Mortgage Broker! With access to over 40 lenders, including major Banks, credit unions, national, regional, and private lenders, we shop the mortgage market for you.

If you are looking at low online rates, do your research but be sure to get in touch with us to discuss. Rock-bottom online rates often come with restrictions and high penalties that could work against you in the long run. Important mortgage privileges don't fit in a rate ad but are critical when determining your situation's best mortgage.

Please reach out at anytime and we will do the mortgage shopping for you.

6 Ways For Homeowners to Build Wealth

History has proven that homeownership is a solid long-term investment. You build your equity stake through your regular mortgage payments and your home’s price appreciation over time. But wealth building doesn’t have to stop there. Here are 6 ways to do more throughout your mortgage years. 

1.      Speed up your mortgage pay down. Change from monthly payments to weekly or biweekly, which increases your number of payments and takes years off your mortgage. Also consider putting found money like raises and tax refunds against your mortgage principal. Check your mortgage contract for the amount you can prepay each year.  

2.      Get a financial reset when needed. Too much high interest debt over long periods of time is a definite wealth killer. It chokes your cash flow and having multiple debt payments can be stressful. If you have enough equity, you may be able to move that debt to your lower-rate mortgage, giving you one comfortable payment and thousands in interest savings.

3.      Renovate using your lowest cost funds. With historically low mortgage rates, homeowners with enough equity are using the opportunity to roll the cost of their renovation into their mortgage for one easy monthly payment, and then using their prepayment privileges to pay it off faster. It’s a win win when you increase the comfort and enjoyment of your home, while also improving the long-term value.

4.      Apply for incentives to help pay for energy saving investments in your home.

The federal government recently launched a new program that offers Canadians grants of up to $5,000 to pay for energy-saving home upgrades, such as insulation, furnaces, solar panels, windows, and doors, and up to $600 to help with the cost of home energy evaluations. Additionally, if you paid mortgage default insurance when financing your home, you can also get a savings boost from your mortgage insurer. If you make retrofits to improve energy efficiency, you can apply for a refund of either 15 or 25% of the default insurance premium that you paid. Applications are accepted within two years of the closing date of your mortgage.

5.      Look at your mortgage renewal as an important moment of opportunity. When your lender sends out a letter suggesting you renew your mortgage at their current offer, get in touch. Everything pertaining to your mortgage can be renegotiated, giving you the opportunity to get the best possible deal for your current situation, which may be very different from when you first got your mortgage.

6.      Know your prepayment penalty. When choosing between fixed-rate mortgages, be sure to compare how the early payout penalty will be calculated. If you ever need to get out of your mortgage early, having the right mortgage could save you thousands. If you take a lower rate mortgage with a high prepayment penalty, the benefit of that lower rate could mean nothing if you overpay on the penalty to get out of your mortgage.

We are here to save you money and help you build wealth throughout your mortgage years. Get in touch at any time!

What affects mortgage rates?

Government policies to protect the economy during the pandemic resulted in exceptionally low mortgage rates for both fixed- and variable-rate mortgages. As we start moving towards recovery, fixed rates have started to edge upwards. The prime rate, which variable rates are based on, has not increased. So why did fixed go up but not variable? Let's look at the mechanics of both.

How are variable rates set?
The chartered banks set the prime lending rate (the rate they offer their best customers). They base their decisions on the Bank of Canada's overnight rate because that's the rate that influences their own borrowing. There are approximately eight times a year the Bank of Canada makes rate announcements. Variable mortgage rates and lines of credit move in conjunction with the prime lending rate, with most lenders currently offering variables at prime minus a certain percentage. The Bank of Canada in their most recent announcement did not increase the overnight rate and did not mention when they foresee the need to increase rates.

How are fixed rates set?
Fixed-rate mortgages are a little different. Banks predominantly use Government of Canada bonds to raise money for fixed-rate mortgages. In the bond market, interest rates can fluctuate more often since they're subject to the changing moods of traders and bond investors as they try to figure out how fast the economy will grow and where inflation is headed. That's why you watch the bond market for clues on where fixed mortgage rates will go next. Recently the yield for 5-year government bonds went up, causing fixed mortgage rates to follow suit.

Why are there so many different mortgage rates?
Fixed and variable are not the only factors affecting rates. There are rate premiums for certain situations i.e., rental properties, 30-year amortizations. There are different rates for insured, insurable and uninsured mortgages. Rock-bottom online rates often come with restrictions and high penalties. The rate you qualify for can be very different from what your neighbour got. That's why it is so important to get in touch for unbiased professional advice when you need to determine the best mortgage and rate applicable to your situation, whether it's for a purchase, renewal, or refinance. Knowledge is power!