Bank of Canada rate cut still on the table for 2018 – doesn’t mean mortgage rates will drop

There is no pressure in Canada to raise rates says VERICO Economist, Michael Campbell.

“While 3rd quarter economic growth was good, the recovery in energy in the aftermath of production cuts due to the Fort McMurray fires played a huge part.  After consistently revising their economic growth forecasts downward for the past four years, most financial institutions are predicting in the neighbourhood of 2 ½% growth in 2017,” says Mr. Campbell.

“Bank of Canada Chair, Stephen Poloz has been dropping broad hints that there is no rate hike until 2018 at the earliest.  In fact, he hinted last week that a rate cut was still on the table. But as we’ve seen in the last month that doesn’t mean that mortgage rates remain unchanged.  Mortgage rates are being influenced by the increase in bond yields and the reduction in competition from non-bank lenders in the aftermath of the new mortgage rules,” adds Mr. Campbell.

If you are in the market for a new home purchase or need to renew your mortgage, contact me to find out how raising rates will impact you.  As a mortgage professional, I can help you develop money saving strategies that will save you more over the lifetime of your mortgage.

Property Purchase Transfer Tax Changes in BC – Finally!!!

Screen Shot 2013-04-29 at 9.55.28 AMThe government has announced, effective February 19, 2014, under the Property Transfer Tax (PTT) First-Time Home Buyers’ Exemption program, qualifying first-time buyers can buy a home worth up to $475,000 and be exempt from paying the tax.  The previous threshold was $425,000.

  • The purchase must be a principal residence and a first time purchase
  • The value must be $475,000 or less and registered on or after February 19, 2014
  • The partial exemption continues and will apply to homes valued between $475,000 and $500,000
  • This cost can not be incorporated into a mortgage, so it must come out of cash funds the buyers had to save along with their down payment.

PTT is calculated as 1% on the 1st $200,000 of the home value & 2% on the balance and is charged on all residential purchases.   With this change, the government estimates 1,700 additional first-time buyers will annually be eligible to save up to $7,500 in PTT when they buy their first home.   Every bit helps especially with the outrageous cost of living in the lower mainland and the ridiculous amount of tax we pay here!

Apparently government estimates this measure will cost $8 million in lost tax revenue each year.  And we are supposed to feel sorry for the government for lost revenue?   Despite the fact that B.C. has the highest home prices in Canada, the province perversely imposes one of the most onerous such taxes in Canada.  The Real Estate Board of Greater Vancouver points out that B.C.’s tax, introduced in 1987, “is structured to reflect home prices in the 1980s, not the prices home buyers pay today.”

We would all like to see  more changes to the Property Transfer Tax, but this is definitely a step in the right direction.

 

First Time Buyer

1st time Home Buyer in new homeFew purchases cost more than buying a new home. While there are advantages to owning your own home versus renting, it’s important to understand how the mortgage qualifying process works before entering into this large investment. You want purchasing a home to be a better deal than renting. The process isn’t complex. In fact it can be broken down into six easy steps.

Step 1: The Initial Application

All home purchases begin with the filling out of a loan application. You’ll be asked to provide certain information such as your address, city and postal code. You will also need to supply your employer’s name, the position you hold and how much you earn annually. If you have additional sources of income, you want to supply this information as well.

Expect to supply information about how much you have available for a down payment and where that money will come from. You should also expect to give a ballpark figure as to how much money you are expecting to borrow.

This information will help the mortgage broker to evaluate what your needs are and to make suitable recommendations for which of the mortgage products out there best fit your requirements.

Step 2: The Qualification Process

During the qualification process, the information you supplied on your initial application is used to attract the lender your mortgage broker has determined will offer you the best value. It’s important that the mortgage broker takes care in how this information is presented. Proper presentation can make the difference between whether you get the best possible rate and terms or not.

The qualification process can often be a rapid one thanks to electronic submission. Often your mortgage broker has a response within hours. When the response is not the one desired, your mortgage broker will continue to negotiate on your behalf to ensure you get the best possible conditions. This may involve more than one lender so that the discount offered on your interest rate is the maximum possible.

Step 3: The Pre-Approval Process

Once you have been approved for a loan, your mortgage broker reviews the rate and term, payment frequency and amount, amortization and other issues with you. You need to be satisfied with the terms of the approval. If there are things that you want to change, your mortgage broker can work on this for you.

Once you are satisfied with the terms proposed in the approval, you will be issued a letter of commitment. This letter places your rate on hold for a certain period of time, which can be up to four months in some cases.

One of the major advantages of this pre-approval process is the fact that you know what you can afford, so you don’t waste your time looking for homes that are outside of the amount of money you’ve been approved to borrow. Meanwhile you have time to look for your home without worrying about whether rates will go up while you’re searching.

It’s important to understand that if interest rates come down, you’re not stuck with the higher interest rate that was quoted in the approval. You are never committed to actually borrowing the money. You’re just protected if interest rates go up.

Step 4: The Purchasing Process

Once you find the house that you want to purchase, it’s time to make an offer. Your realtor will negotiate this on your behalf. Once you have settled all the details, you are ready to submit the final loan application which stipulates exactly how much you will be borrowing.

Step 5: The Verification Process

Before you actually receive a disbursement on the mortgage, your approval will be further verified. Expect to supply information that verifies your income such as a job letter and a recent pay stub. Expect to provide bank statements that prove that you have the down payment in savings. Your mortgage broker should provide you with a list of all the different proofs that are necessary to prove to the lender that you have adequate reserves to keep up with your mortgage payments.

During the verification process, it may become apparent that you have less than 20% to place down against your home purchase. In this case, the lender will require CMHC or Genworth (GE) mortgage default insurance to protect the lender against loss if you default on your loan.

Step 6: The Closing Process

Until the purchase is registered legally, you don’t own the home. Closing involves transferring ownership on the property from the seller to the buyer. This transaction requires an attorney, preferably a notary or lawyer who specializes in real estate transactions.

The lender forwards closing instructions to your attorney who would then prepare all legal documents. You will meet in the attorney’s office and sign all the paperwork there. The lawyer will act as an escrow agent, receiving the funds from your lender. When the seller has signed the proper paperwork, the attorney will disperse the money to the seller or builder of your new home.

To get started call Darren Popoff at 604.818.9262 or Click Here for the Secure Application.