Economy & Mood

Recently I encountered a stark reality in the mortgage business.  I reviewed in June 2011, the profile of a couple who came to me for a mortgage.  Their situation was quite financially weak, which made them unable to get a mortgage approval at that time.  There was a gifted downpayment, a serious past credit issue, and generally limited credit scores. 

I suggested that they wait at least a few months before buying.  This advice was based on the advice of the lenders and the insurers who make the ultimate decision if a person can qualify or not.  Again, they first came to me in June, and this September they returned.  What they didn’t know was that the industry has changed.

The lenders and insurers moods have changed due to the economy:  Greece is near bankruptcy and unemployment has not improved in North America.  Those same lenders who were encouraging in June changed their minds and became discouraging in September.  The emotional part for me is, I based my advice on June’s predictions, when I encouraged the couple their deal might work.  Guess who is the bad guy now?

 I feel for people whose deals fall through, but thankfully, that doesn’t happen very often.  However, the mortgage industry is forever changing, and seems to be changing more rapidly every day.  This is not a good thing for people with poor credit and weak finances.

Lender Industry Mood

Many times you can plan your lives and actions based on the economy. When there is a strong economy, that usually means jobs are plentiful and we can feel secure in buying commodities like homes, etc. Of course, the opposite is true and you should be careful during a poor and insecure economy.

We have an interesting time now in our country when considering the above. Canada’s economy is strong and the envy of the world, yet overall the global economy is in trouble. The U.S, Ireland, Greece, Italy, Spain, etc. all are experiencing huge debt and economic challenges. How does this affect us? Well, since we depend on exports to the rest of the world, it might be wise to tread carefully if you choose to buy a home. Lenders will demand more income proof. Their mood is also cautious and that means you’ll be asked to provide whatever they want and if you don’t, you will find out how cranky they can be. Income proof such as employment letters, paystubs, T-4’s, and Notices of Assessment are important and generally asked for.

Looking for more information? Contact us by Facebook, e-mail or our website (www.slaney-mortgages.com).

Happy New Year & FAQ's

Welcome to 2011!

One of the best decisions an applicant can make is to seek out an experienced and knowledgeable broker-agent.  Finding someone who educates you and meets your needs is the key to a successful and beneficial mortgage.  Remember, the broker-agent should meet your needs. 

With this in mind, periodically I will blog frequently asked questions, in the hopes of aiding existing and future clientele.  Please take advantage of my blog, Facebook page, or e-mail address if you have any of your own questions you would like answered.

FAQ #1

Are all lenders the same?

Every financial institution—bank, mortgage company, or credit company have some common policies, but they absolutely do have different rules.  One common example is a specific bank that will do a commercial mortgage product but the applicant must occupy part of the property.  This, of course, is not always your intention.  Not all people are self employed and need a place to operate. You may simply want to buy a commercial property for business/investment reasons. 

FAQ #2

How do mortgage insurance premiums work?

You should be aware that Canadian banks are restricted from lending you more than 80% of the value/sale price of a property.  If you have 5%, 10%, 15%, etc. for downpayment, a lender must get your application approved by Canada Mortgage and Housing Corporation (CMHC), Genworth (GE) or Canada Guaranty.  In this case, your mortgage will be insured.  If you fail to make payments the insurer pays the lender the money owed and the insurer takes over ownership.  If you ever default on an insured mortgage, the insurer will not insure another purchase for 5 years.  The insurance premium is based on amount of downpayment.  The less put down, the higher the insurance premium.  Here is the standard charge for 25 year amortization:

                                                                5%          -              2.75%

                                                                10%        -              2.00%   

                                                                15%        -              1.75%   

                                                                80%        -              1.00%

 (If you use a 30 year amortization, add 0.2%, and if 35 year amortization, add an additional 0.2%).

 Using 25 year amortization and a sale price of $200,000.00 here is how your mortgage is calculated:

                Sale Price:                            $200,000.00       

                5% Down:                            $   10,000.00

                Difference:                            $190,000.00

                Ins. Premium (2.75%)            $    5,225.00

                Mortgage                             $195,225.00

This is a onetime charge on your property if you do nothing more with your mortgage.  If you refinance in the future and take a new amortization, there will be an insurance premium charge. (You will only be charged a new premium of the new money required during the refinance, if you keep the same amortization).   Use the above formula or my website calulator to do your own mortgage calculation or read more about insurance and links to specific insurance company websites here.

Happy Halloween!

-- Thanks to political cartoonist and Editorial Cartoonist for The Columbus Dispatch, Jeff Stahler, for this appropriate cartoon --