Housing prices had also been increasing for 14 straight months, were up 13.6 percent from June of 2009, and 1.5% for the month.  With fixed mortgage rates also decreasing so significantly in the past 2 weeks it would be bound to give the real estate market some stimulus heading into September, which is traditionally a busier time of year for the real estate market than the summer.  The low number of listings currently available is also helping to take the supply out of the market and protect values.

In conclusion, there are currently less listings for the fewer buyers who are buying, and we are approaching a busier real estate season with all time low interest rates, and for many properties HST is not an issue.  If you are thinking about buying a home, you should be.

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Further, I would still consider variable rate mortgages to be very attractive, and as you may have read several times on my website, I still think that they are the better option at this point in time, and will continue to be for the long term.

Almost 2 years ago, many people did their mortgages at variable rates of prime +1% or so.  It has worked well for them with such low rates, but refinancing now would save people in that position at least 1.5% on their mortgage rates.

It also is a relatively inexpensive mortgage to break, with just a 3 month penalty to finance another mortgage that will save you that much in just 1 year.

With a low Bank of Canada prime rate and slumping US and European economies, its a great time to refinance.  Fill out the form below and I will be in touch with you shortly.

This is part of the reason I have continued to recommend variable rate mortgages to clients.  The lower rates appear to be here for a while still and even before the turmoil of the US markets variable rates had historically come out ahead of fixed rates.

It is still a great time to get a variable rate mortgage, with rates almost down to pre-recession levels. Contact me to get a great rate on your mortgage.

The underlying difference at this point, which is the Bank of Canada rate, could actually be a fourth factor responsible for the slowdown in the real estate markets, along with tighter mortgage lending rules, the introduction of the HST in BC and Ontario, and the traditionally slower summer real estate season.  With higher variable rates and the real possibility of even higher variable rates in the next year, it is a sobering thought for many prospective homebuyers, especially in Vancouver where real estate fetches such a high premium.

The higher rates will also result in slowing down the economy, which will cause people not to have as much money and subsequently be more careful about borrowing for a home purchase.

It is usually a good time to think about buying in times like these, as the economy is slower and rates are low.  When the economy picks up again and people have more money, it is going to be that much difficult and more expensive to get a home in areas like Vancouver with so many people occupying such a small area.

Are you ready to take advantage of the low interest rates and the soft housing market and get into the housing market?  Fill out the form below and we will get started!

While it sounds like doom and gloom by the heading and the beginning of the article, and most of these types of articles come out in a reaction to a housing downturn, the content of the article seems to be quite realistic.

The main thing that I agree with is that the market is not going to be destroyed in the years to come, but that it is going to be more “balanced” which means that there are not going to be as many buyers rushing to buy and that increases in housing prices will be more moderate.

It is also worthwhile to note, as a mortgage broker in the Vancouver area, that I have not been actively recommending property speculation in the Vancouver area despite historical increases in property values.  As a mortgage broker, I look primarily at cashflow when giving my opinion on an investment property to a client.  It is cashflow that you can take to a mortgage lender and finance.  Negative cashflow situations make it difficult to maintain flexibility, and most of the properties in the Vancouver area will not cashflow.  There are still many areas outside of the Greater Vancouver Area that I can finance great cashflowing properties in.

For those who are looking to buy and live in a home, I think it is still very worthwhile to buy, and it is still safe to do so.  People who buy to live in a home will stay in their home for the longer term, and will likely realize appreciation in the value of their home, as well as have essentially a forced savings program via mortgage payments.

As I have also stated recently, it is my belief that the recent decrease in sales and property values in the Vancouver area as well as across Canada are market adjustments to stricter lending rules and the introduction of the HST and its mistaken negative impact on the real estate market.  Notice in that article I said “market adjustment” and that article is from March.  Well…here we are!

Lending and buying will increase and things will start to get more back to normal in September when the kids are back in school and the barbecue is packed up, even if it is not back to the levels as its been the past 5 years.  I think this is a good thing, as I think the market as it has been was unsustainable.  If it kept going like this, no one would be able to afford to buy a home in a few years.

If you are looking to take advantage of the quiet time this summer to get a great deal on a property, fill out the simple form below and I will be in touch with you shortly.

All in all, it is not surprising to me, having heard word from realtors and other mortgage brokers who have seen a decrease in business, and I have stated many times to people that there will be a market adjustment whenever there is a major change to mortgage lending rules. Additionally, the change in BC to the HST will also have scared some buyers off temporarily, and that has come into effect on July 1.

Rates are still low, and with lower prices, it appears to be a great time to buy and be able to get a property that you really like, which is difficult in times where the housing market is hot.  Additionally, it is my belief that it is a really good time to move up in the market.

The housing market right now is similar in nature to the autumn of 2008, where mortgage lending rule changes were a factor in the decrease in home sales.  At that time, there was also the US housing crisis to consider.  July is also generally considered a quiet time of year and the market was already adjusting to the mortgage changes (the same mortgage changes that caused a sales spike in April as people hurried to buy before the rule changes came in) when it got hit by the perception of the HST making housing a lot more expensive.

Historically, people are busy enjoying their vacations in the summer, and get back to the business of buying homes in September.  It is my belief that this is when the market will adjust back to a more balanced market, and when there will be a lot more competition again, and prices should remain stable or rise at that time.  It is a good time to pick a place in August.  Real estate is generally a long term investment that appreciates over time, and I do not believe that will change anytime soon.

Take advantage of the low housing market and get pre-approved for a mortgage today while rates are at historic lows!  Fill out the form below and I will be in touch with you shortly.

The Argument for Online Mortgage Applications

We live in a connected world, where we can do many things without leaving your home.  Great applications exist for this, such as online shopping, which can save people money if they are willing to wait for the shipping of the product and it is not a product that you need to look at and touch to assess quality.

Clearly, an online mortgage application is convenient.  It is also true that they are usually secured quite well.  For some mortgage brokers, it is ideal.  They actually get someone (the mortgage client) to do part of the work for them without even taking the time to meet with the person!

So Why Do I Not Have an Online Mortgage Application?

There are several reasons why I do not employ the online mortgage application.

1. You do not know who I am, and you do not know where your VERY personal credit and contact information is going. While I do have my name, picture and contact info on every page of my website (unlike many other mortgage brokers and lenders) I am old fashioned in that I think it is appropriate to at least have a telephone conversation with someone before obtaining their sensitive personal information.  Wouldn’t you, as a mortgage client, want to know who you were dealing with?  Fraud is a significant problem in the mortgage industry in Canada.  I think it is fair that you as a consumer should know a little about the person who is handling your mortgage financing.
2. I feel it is very important for me to know who I am working with. Mortgage fraud, as I had mentioned, is a significant problem in Canada.  There are unscrupulous mortgage agents and brokers working for the banks as well as mortgage brokerages. There are also many cases of fraud on the part of mortgage borrowers.  Meeting and talking to your client is an important part of ensuring that mortgage applications are legitimate.
3. If mortgages could be arranged by themselves, there would be no need for a mortgage broker.  Simply put, when someone thinks about information such as their income, the way a borrower looks at their income is not the same way a mortgage lender will look at their income.  It often takes a time sitting down and discussing these matters to really sort through those questions and ensure accurate information to structure a successful mortgage financing.
4. Better service and a more personalized service.  I will meet clients in places convenient to them, I am mobile and so it is not like they need to go somewhere to meet with me.  I also meet clients on evenings and weekends, so that you do not have to skip work or interrupt your day to meet with me.

If I were shopping for a mortgage, and I came to a website where there is no face on the website, no name besides a company name, and I had no idea who would be looking at or working with my personal information, I would be very suspicious of the legitimacy of that site.  They may be legitimate, but would you really want to take a chance?

When you come to my website, you see who I am.  I am the one in the picture on the right hand side of the screen.  You see my business address where I spend most of my days.  I handle your personal information, and I do it with the care and respect that it deserves.  I am not hiding behind my company logo, and your mortgage application will not land in the hands of 1 of 1000 people, 10 of which may not be legitimate (maybe less, maybe more).  When you fill in a mortgage application with a bank, it is not assured that your information will absolutely land with a good, honest agent.

My strong suggestion is to know who your mortgage broker is, and to meet them.  It won’t ensure that a fraud will never happen, but it will definitely improve the odds in your favor.  If you receive a call and its a mortgage broker in Toronto when you live in Vancouver, how can you ever know who you are working with?

Eliminate the chances of an unscrupulous broker working on your mortgage. Even if you are out of town, you know who I am and you can contact me easily. Fill out the form below to receive a quick callback from me personally.

With the mortgage lending rule changes of April in effect, many people will not have a lot of choice and will have to choose a fixed rates in order to get the most available house for themselves under a high ratio mortgage.  However, for those who do have a choice, I would consider this article poor advice and inaccurate.

First of all, variable rate mortgages did not help people get more house than they could afford, as this article infers.  The reason for this is that borrowers have to be qualified at a higher interest rate than the variable rate that they received…even before the April mortgage rule changes.

Secondly, if the overnight benchmark rate for the Bank of Canada DOES rise to 4% (a big if that is quite distant in the future, in my opinion), then the prime rate would be 6%, and then you would apply the discount to prime that the variable rate mortgage offers.  Right now, I have a variable rate mortgage discount as high as -.75%, which would put the mortgage at that time at 5.25%, not 6%.

Further, the spreads on bonds (the bond market largely dictates what fixed rates will be) are much larger now than they have been in a while.  What this means is that bond rates are low, which means a lower cost of funds for the banks, and the spread is their profit margin.  Right now, the mortgage lenders are giving themselves an extra .5% margin beyond what they typically do.  In other words, if they are pricing fixed rate mortgages 0.5% higher than they currently do, and pocketing the difference.  Word is that they are doing this due to “uncertainty” in the markets and don’t want to leave themselves short.

However, however you slice it, they are currently making about 30% more money on fixed rate mortgages now than they normally do…and then is it that much of a coincidence that the newspaper comes out with an article designed to scare people into preferring fixed rate mortgages?

At the same time, albeit I am not a senior economist of a big bank…I still take issue with the idea that the Bank of Canada prime rate will increase significantly in the short term (not that .5% is not significant, but it isn’t as significant as 4%)  I still hold the belief that the “economic recovery” in Canada cannot be complete without an economic recovery in the US.  I still hold the belief that Canada’s prime rate can only go so far without the US increasing their federal reserve rate.   To think otherwise is to look at the Canadian economy in a vacuum, ignoring the relationship between this country and its largest trading partner.

Regardless of whether I am right or wrong about the indications on interest rates on variable rate mortgages, it cannot be ignored that based on todays best variable rates, it would take another 8 interest rate increases of .25% in order for the variable rate to match todays best 5 year fixed rate.  If the Bank of Canada decided to raise rates by .25% every single decision date from now on, it would take them almost a year to do so.

It seems to me that we live in a very turbulent world at this time, particularly with US subprime crisises and oil leaks.  The wars don’t appear to be coming to an end very quickly either.  Can it be safely assumed that we have seen the end of the turmoil?  Can they really increase rates to pre-recession rates with such uncertainty and turmoil in the world?

Newspapers are notorious for misquoting, taking things out of context, and manipulating the emotions of the population to meet an agenda of a given party.  Do not make decisions based on fear.

Contact me today, I can help you with your mortgage financing needs.  Fill out the form below and I will respond shortly.

Mortgage Borrower’s Background

The couple in the article are independently wealthy, having $2.4 million in equity spread out over a dozen rental properties and owning several small businesses including a consulting business.  Most of their net worth is tied up in real estate currently.  Their $2.4 million of equity nets them just over $17,000 per year despite the fact they are in the lowest interest rate environment in the history of Canada and they are in variable rate mortgages on all the properties.

Where I Agree With The Financial Planner’s Analysis

These mortgage borrowers are obtaining a very poor return on investment in their real estate holdings.  This is not surprising considering their real estate holdings appear to be in the Greater Vancouver Area.  Although cashflow from investments is not a primary indicator of the quality of investment, I tend to believe that if you invest in real estate that cashflow is of greater importance than the appreciation in the value of the property. Although they have likely done well for themselves by purchasing their properties and having the value increase, they will likely be under duress in the coming months due to the recent rate increases to the Bank of Canada prime rate.

Where I Disagree on the Analysis

The financial planner who analysed the readers financial situation for the article to a large extent provided a largely self-serving analysis to the couple’s financial situation, as he suggested they liquidate their real estate holdings and invest the funds in a Real Estate Investment Trust (REIT), a product that by coincidence is offered through financial institutions and investment houses (like the one he works for).  He suggests that they could make 7% on the investment.

Liquidating their assets would be a good idea due to the poor return they are currently getting on their investment…but I do not think that they need to get out of real estate ownership.  Although I am not a realtor, I have been able to see prices and cashflows on properties in the Greater Vancouver Area…and they generally are not very good, particularly for residential properties such as detached homes or condominiums.  However, commercial properties are quite a viable option for those with the equity that this couple has.  Further, they can rid themselves of the management of the property altogether by hiring a property management company to administer the building.  This could also allow them to buy property outside of the lower mainland and provide even more cashflow and greater returns.

However, lets assume they buy a sample property in the lower mainland.  It is quite possible for them to buy a multi-unit residential property with a capitalization rate (net income / property cost) of 6%.  Assuming they put down 50% for a purchase of a $4.8 million property with a 5% fixed interest rate and 25 year amortization, I estimate they would cashflow approximately $120,000/year out of such a property after mortgage payments and would additionally be paying down their mortgage at the same time.

These numbers are very simplistic and rough, but they are realistic and on the conservative side in this market. If they were to buy outside of the Greater Vancouver Area, it is possible their returns would be even much better. I am also being conservative on the rate as rates are currently lower than 5% for a fixed rate at some commercial institutions for multi-unit residential properties.

In this case, I do not believe that real estate is a bad investment for this couple, but the type of real estate they are investing in is not the right one for them particularly at this time.

Are you thinking of getting into commercial real estate investment and don’t know where to start?  Fill out the form below and I will be in touch with you shortly to help you get started.

I did recently receive an announcement email from them, but it appears that they are starting slowly, which is normal for a new mortgage lender in the broker channel.  Since they are one of the largest banks in India, and they are quickly growing in Canada, I am hopeful that they can shake things up a little amongst that banks.

I will be keeping my ears open about them in the future and be waiting to see if they become a viable option for my clients.

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