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Hi there! I hope that this newsletter finds you well… I’d like to mention a few things before I get started: Firstly, our website now has a BLOG! You can find it under “Mortgage Tips” on the front page (I hope to see you there). Secondly, I welcome anyone to follow me on twitter (@danmass37) to keep up with market changes there as well. Lastly, I invite you to visit and join our team on Facebook @ Verico Canada First Mortgage. Let’s dig in… We are surrounded with information. We get our information from all different information vehicles; TV, internet (Twitter/Linkedin/Reddit/Facebook/blogs/etc.) friends, co-workers….and yes, newsletters. Who do you believe? Of course, when certain people talk, we listen a little closer…we know who those people are, don’t we? We all have them in our rolodex of “influential speakers”. When it comes to economic outlooks, the common thread to consistency appears to be the ‘data’ that these forecasters use. If your data isn’t relevant, you’re obsolete. It’s much like technology – yesterday’s model is not worth talking about because there’s something better on the market. Your “news” that you just heard is out the window tomorrow because that’s how fast things are seemingly changing.
Makes it a little difficult to be a reliable source, doesn’t it? I’m going to stray away from getting into exactly “what” is being done to correct our economy on this newsletter; like I say – we’re surrounded with information about that and it will have a tendency to get political. Therefore; I wish to focus on the mortgage front to fill you in with the changes that are still going on. Let’s start with some GOOD news for the consumer… Interest Rates: I won’t spend too much time here…we all know that interest rates are ridiculously low, and that NOW is the time to get into the market if you haven’t already thought of it. Have you ever stopped to ask yourself: Is it a good thing that interest rates are this low, and will continue to be for the next year? It’s double edged isn’t it? If the key lending rate is .25% (Prime rate being 2.25%) and will STAY this way until June of 2010, what does this say about our economy? Yes, it does make one wonder… In the meantime, there’s always opportunity in a recession – and this is the recipe for many an opportunity! And now…the challenges… Lending Guidelines: The lending practices of lenders today are quite easy to describe: it’s MUCH harder to obtain financing than it was a couple of years ago. Good credit, good job tenure, and a positive net worth will be the ingredients you need to get the best rates.
On April 18, 2009, Genworth Insurance changed their guidelines to the mortgages that they will insure. You can view the latest changes on my blog @ http://tinyurl.com/d65xuv . Refinances/Early payout for a better rate: These past few months have presented some challenges in the refinance or early payout for a better rate arena. Banks make their money by either making money on the interest for outstanding money based on a set amount of time, or they make it by charging a payout penalty when you ‘break’ your mortgage. In many, many cases it makes a LOT of sense to break your mortgage and get into a better interest rate. BUT, in some cases I’ve seen upward of $30,000.00 payout penalties!! Why? It’s because of the Interest Rate Differential (IRD). Many of us have heard of the typical “3 month interest penalty”, but many were faced with the IRD when trying to switch a mortgage over for a better rate in this recent market. In layman’s terms, the Interest Rate Differential is the difference between the cost of money when you took your mortgage out, and the cost of money at “today’s” rates. Within this calculation, the difference in the rate discount you received when you obtained your mortgage, and the “today’s” posted rates are applied; in turn creating a greater gap in cost difference. What’s the end result? Your payout penalty increases THAT much more. The bank will charge you the GREATER of the 3 month payout penalty, or the IRD. In today’s market, virtually everyone is being charged with the IRD. Like I mentioned in the blog; we are in an adjustment phase with lending as we navigate through this economic storm… Again, I invite you to join me/us on the social media listed at the beginning of this newsletter, and I hope to hear from you! Please let us know if you have any questions regarding your mortgage, or mortgages in general! Let’s keep focus on the GOOD things…NOW is an incredible time to deal with your mortgage and get that historical low rate!!
I hope to talk to you soon…
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