You have likely recently learned that signs are pointing towards an ease of inflation with the economy softening. You may have heard this in a variety of ways, from watching some of your stocks start to go up, hearing the term “bull” market in crypto, seeing relaxed spending in individuals or other such things.

Believe us when we say that this is great to see and we are very happy a more relaxed economy is taking shape. That being said, it is not at acceptable levels and we are now approaching what we believe is the final Bank of Canada rate increase. Although we are seeing a decrease in inflation in some areas, you probably recently visited a grocery store to see the price of meat, chicken in particular, skyrocket. These types of eye popping inflation numbers are still being seen as worrisome.

With that said, you have likely now heard the news that the Bank of Canada has announced its eighth consecutive rate increase, boosting their key rate another 25bps to 4.50%. That will drive the prime rate to a two-decade high of 6.70% (yes you heard that right).

You probably remember that it was only 14 months ago that floating-rate borrowers were enjoying record-low rates like 0.85%. Crazy times.

Is this all bad news? 

Not at all, in fact, the good news is hidden in the words. Although it is easy to see a negative connotation from another hike rate, it is also said to likely be the last of the hike rates. The Bank says it expects CPI inflation to fall “down to around 3% in the middle of this year. This should give you hope since 3% is the top of the Bank of Canada’s inflation target. Its overall goal is to see CPI inflation at the 2% midpoint target next year.

We do not know how key interest rates will change in the coming months. It is likely that they will put a pause on all increases for the time being, but expect it to be a few months or more because they start to lower it again. A few markets expect that the next Bank of Canada move will be a rate cut, but that we should not expect it to come until October. For these reasons, we believe this will be the final Bank of Canada rate increase

Will Interest Rates ever go down?

You have likely heard the saying, “what goes up will eventually come down.” Now, for inflation, that is hard to justify. On one hand, yes the rate of inflation will drop over time as the Bank of Canada continues its tough measures on the economy. On the other hand, a lot of these expensive prices may be here to stay. For example, if something you bought went up 14% during the past 2 years, then it will likely stay at that price, but with lower inflation it will only marginally go up in the future (2% a year).

In terms of interest rates though, that is an intriguing question. Certainly interest rates will go down as the economy improves, but the 1990s, early 2000s saw extraordinarily low interest rates which were supported by the disinflationary force of globalization. It will be interesting to see how interest rates change as the new era of our economy takes shape. Next week we will be writing a blog on where interest rates may go in the future.

How will this Interest Rate Hike affect Mortgages?

The key interest rate hike jumped up by 25 basis points and as we said above, Canada’s benchmark prime rate is now at 6.70%. This means that payments on Canada’s average adjustable-rate mortgage will jump by about $14 a month on every $100,000 of mortgage balance.

The federal stress test rate will climb to;

• 8.70% or higher on HELOCS
• 7.50% on the lowest insured variable rates
• 8.15% on the lowest uninsured variable rates.

Always do your research before deciding to enter the mortgage market or redoing your mortgage. Make sure you understand how this will affect you and your region/market and understand how you could be affected if this was or was not the final Bank of Canada rate increase. Do not get discouraged by these trying times. It is always best to enter the market when you are ready. If you feel ready or have any questions, give us a call and we will be happy to help answer any and all questions and inquiries!

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Bank of Canada Rate Increase

You are probably used to seeing us use these words, but the Bank of Canada has again raised the key interest rate. The Bank of Canada has decided to increase rates by 0.5. It is a historic year as the Bank of Canada has never had five increases of 0.5% or more in the same calendar year and is the fastest raise of interest rates ever in Canada.  

The demand for goods and services is still running ahead of the economy’s ability to supply them, putting upward pressure on domestic inflation. Businesses continue to report widespread labour shortages and, with the full reopening of the economy, strong demand has led to a sharp rise in the price of services. 

Key interest rate increases are key to tackling this predicament. 

The Bad News?

Inflation is still very high, reported at 6.9% in September. People are seeing it in everyday purchases and it is causing stress, anxiety and a dampened wallet. We know this is a hard period. Please refer to a recent blog we wrote for some tips on how to best negate some of these worries. 

The Good News?

At the peak, inflation was at 8.1% in June, so it has dropped 1.2% in 3 months which is starting to show promising signs. Although this is promising signs, the Bank of Canada notes that the curve in inflation is mostly due to the fall in gasoline prices. 

More good news is that the bank is working towards removing the excess demand from the economy to make the demand more in line with the supply side of the economy. 

What Does This All Mean?

Now that the Bank of Canada rate is at 3.75%, that means that we are past the neutral range of 2-3% and entering a key interest rate that actively suppresses economic activity. To figure out the key interest rate to propose, the Bank of Canada looks at many factors, such as the level of debt of households, economic growth and economic confidence, alongside the  international economic condition.  

The Bank of Canada does not have a completely known key interest rate at what would get it right and take the inflationary pressure off without creating a deep recession. 

How Long Will This Last?

Well, history shows that the Bank of Canada Rate Increase rates takes about 3-6 months to show its full effect, but it can be faster when the average consumer chooses a cautious approach of opening their wallet. That basically means that the higher rates are trying to push people into reducing spendings by fear of higher rates and inflation toppling their budget they can afford. If the spending spree reduces, it’ll give companies that are struggling to keep up with production a lull period where they can catch up and this will help regional, national and in a small way, global demand. Global demand will be more balanced if all countries start to take this approach, and we are seeing governments start to take similar methods. 

The Bank of Canada projects that GDP growth will slow from 3.25% this year to just under 1% next year and 2% in 2024. 

When Will These Hikes Stop?

These hikes are not likely to end until inflation has been curbed to near or under 2%, which is the normal national average of inflation per year. The Bank of Canada anticipates that CPI inflation will move down to about 3% by the end of 2023, and then return to the 2% target by the end of 2023. 

The hope is that these rates will work fast, but the Bank of Canada understands it needs to balance the act of curbing inflation and making sure we do not enter a recession, which is why taking a more steady approach is likely. For this reason, we anticipate that more rate hikes will come in the near future. Not only that but the Governing Council expects that the policy interest rate will need to rise further. As always we will update you when those hikes happen and how they will affect you.

Please reach out to us if you have any questions regarding the Bank of Canada Rate Increase and how this may impact you and the future. 

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Increase of Prime Rates – What Does This Mean?

With the increase of prime rates over the last few months, there’s a lot in question. Many people are questioning if they should have a fixed rate mortgage or a variable rate mortgage. There are many factors to consider when choosing between fixed and variable rates, this blog will help make your decision more simplistic.

Pros and Cons

When looking at which rate to choose, you’ll need to consider the pros and cons of both rates, and what may be the most beneficial for your mortgage financially.

1. Pros and cons of a fixed rate

• Pros
  • You have stability for the term of your mortgage. Your mortgage payment will remain the same and there will be no charge to your mortgage payment each month.
• Cons
  • A fixed rate is typically higher than a variable rate
  • If you were to break your mortgage you may be charged at interest rate differential. An IRD can be a significant cost and it is typically 4.7% of the balance. This works out to $4,700.00 for every $100,000.00 that you have borrowed.

2. Pros and cons of a variable rate

   • Pros
     • A variable rate is typically lower than a fixed rate.
     • Statistically a variable rate has outperformed the fixed rate for the last 40 years.
     • You have the option to lock into a fixed rate at any point in the term of your mortgage at no cost.
     • If you break the term of your mortgage early your penalty is almost 3 months interest.
   • Cons
     • Your rate will change as the Bank of Canada adjusts the prime rate.
     • Pending on the lender your payments can fluctuate.
     • As prime rate changes the amount going to interest and principal will vary.

Which Rate Is Best for You?

Look at the case study below:

Prime Increase of 0.75%

• The lowest 5-year variable rate is 3.75 with a monthly payment off $2,123.36
• For every $100,000 mortgage the monthly payment increases by $26.00
• If you have a mortgage of $413,000 your monthly payment will increase by $107.38
• The monthly payment will come out to be $2,230.74

Fixed Rate – Should You Lock In?

• Todays best 5-year fixed rate is 5.63%
• For a Mortgage of $413,000 – monthly payment will equal to $2,568.34
• This monthly payment is HIGHER with the Bank of Canada increase to Prime by 0.75%
• Continue to choose variable!

It is PARTICULARLY important to have a clear understanding of the implications when it comes to choosing between variable mortgage rates and fixed mortgage rates and what’s best for you. It makes a significant difference in future planning and can impact you in incredibly substantial ways.

At GLM Mortgage Group, we know what questions to ask. We have relationships with the lenders that you know about and the lenders you don’t. We would be pleased to educate you on the financial options available to you. We want you to make the best decision possible on the mortgage that you are committing to. Call us anytime for a FREE consultation on the mortgage products available to you.

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Trigger Rates & Trigger Points

It is no secret that interest rates are continuing to rise. The Bank of Canada has done a super-sized rate increase the past few times with interest rates increasing by half a point or more. Many people who are in a variable-rate mortgage ask what a trigger rate is and how it could affect them. There are two types of variable-rate mortgages. The first is ARM and the second is VRM.

Adjustable-rate mortgage (ARM) is the most common variable rate. With this type of variable rate your mortgage payment will increase or decrease as the prime rate changes, meaning the amortization will not change. With a variable-rate mortgage (VRM), your mortgage payment does not change with the rate, which means the amortization will change.

When Do You Reach the Trigger Point?

The trigger rate is the rate at which the regular mortgage payments no longer cover the accrued interest. If interest rates for the variable rate have increased, your entire payment is dedicated towards the interest, and nothing is going against the principal. If in some cases rates were to increase more, the payments will no longer cover the interest.

To find out when you will reach the trigger point, you will need a formula to calculate lump sum. Once you have found your lump sum, this will then determine if you need to switch to a fixed rate with a higher payment. There are various sites that have a calculator for these specific equations, which makes it easier to figure out if you have reached your trigger point.

What is a Trigger Rate?

A trigger rate is the interest rate level where your lender can adjust your payment amount, even if it is normally fixed. The trigger rate applies to variable-rate mortgage holders that are on a fixed payment basis.

A variable rate mortgage has trigger rates to ensure the homeowners are always building equity with their payments, especially as interest rates rise. With a variable-rate mortgage, the amount you pay is usually fixed. What changes is the amount of your payment that is going towards interest. Sometimes lenders lump variable-rate mortgages together with an adjustable rate, which is completely different.

With an adjustable rate, the payments either increase or decrease due to shifting interest payments. With adjustable rates, they are like fixed rates, so there is no need to worry about a trigger rate in this case.

How Is Trigger Rate Calculated?

The quickest way to determine your trigger rate is to review your mortgage documents. Your trigger rate will be displayed clearly, so you will know when to expect a call from your bank. That said, the trigger rate outlined in your documents assume you have not made any prepayments. Every time you make a prepayment, it is applied directly to your principal, so your trigger rate would increase. To get a more accurate number, your mortgage lender will then calculate your current trigger rate to know how much breathing room you will have.

The following shows trigger rate formula:

• (Payment amount X # of Payments per year / Balance owing) X 100 = Trigger rate in percent.
• If you have an outstanding mortgage balance of $500,000 with bi-weekly payments (26 payments per year) of $1,100, your formula will look like this:
  ($1,100 X 26 / $500,000) X 100 = 5.72 percent

It is PARTICULARLY important to have a clear understanding of the implications when it comes to all the trigger rates and trigger points. It makes a significant difference in future planning and can impact you in incredibly substantial ways.

At GLM Mortgage Group, we know what questions to ask. We have relationships with the lenders that you know about and the lenders you don’t. We would be pleased to educate you on the financial options available to you. We want you to make the best decision possible on the mortgage that you are committing to. Call us anytime for a FREE consultation on the mortgage products available to you.

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A mortgage is a type of loan that is used to purchase or refinance property. A few basic features of a mortgage include the purchased property, which is always used as collateral, and regular payments to the lender are required. Mortgages can sometimes cover the cost of property taxes and insurance premiums. Mortgages are quite substantial monetarily. You can even get a mortgage that is worth millions.

Fixed vs Variable Interest Rates

A fixed interest rate means that the interest rate applicable to your mortgage will be consistent throughout the mortgage’s life, regardless of any external activity. A variable interest rate will change as your bank’s prime rate changes. More indicatively, the interest rate fluctuates based on the decisions the Bank of Canada will make. The Bank of Canada will make their decision based on how the economy is, this way your mortgage interest rate will essentially fluctuate based on external activity. Generally, when the prime rate increases, your mortgage variable rate will increase. Therefore, when the prime rate decreases, your mortgage rate will decrease.

It’s difficult deciding between a fixed and variable interest rate when looking into a mortgage. It’s a tough decision to make, due to the not knowing what the future holds for any mortgage and whether the future has a great impact on interest rates. If you feel that economic conditions will be favourable in the future, it’s best to go with a variable interest rate. In other cases, if you feel the economic conditions will be unfavourable, it’s better to go with a fixed interest rate.

Open vs Closed Mortgages

Having an open mortgage means you can pay off your mortgage balance early without any penalties. A closed mortgage only allows for a certain amount of payment each year, in addition to the regular payments. Although, some closed mortgages will not allow lump sum payments at all.

Borrowers usually choose a closed mortgage because they have lower interest rates. Closed mortgages have lower interest rates because the lender won’t have to worry about the lost interest if a borrower were to pay off the loan early. However, if you expect that you will have the money to make large lump sum payments towards your mortgage, then going for an open mortgage is a better option. Lump sum payments go towards the principal balance only, you will end up paying less interest overall this way.

Property Transfer Tax:

• Property Transfer Tax is a one-time tax paid to Province of BC by the purchaser whenever there is a change of ownership or change in shared % interest in a property.
• Property Transfer Tax is calculated based on the fair market value of the property at the time of transfer.
• The percentage of the tax that you owe is based on the % shared ownership or shared interest you have.

  One important point to keep in mind is that Property Transfer Tax is provincial and is NOT the same as the annual Property Tax which is paid to the local municipality every year.

Steps Included In Getting A Mortgage

Pre-Qualification: This is ideal when you’re only thinking about buying a home. A lender will collect basic information about your finances and then give you an approximate figure for how much they’d potentially be willing to lend you to buy a property.

Pre-Approval: Getting pre-approved for a mortgage is more formal than pre-qualifying. In this stage a lender will verify the financial information you provide them and run a credit check. If you’re pre-approved it indicates that the lender is committed to providing you with a loan, though the final amount they’re willing to lend you and the terms of the mortgage are subject to change based on an actual property valuation as well as market fluctuations.

The Mortgage Stress Test: This is a calculation of whether you can still afford to pay your mortgage if rates increase. The results of this stress test will determine your qualifications for the mortgage you’re looking to take and applies to all home buyers, and what we need to do for debt servicing, including those who make a 20% down payment on their home.

Down Payment: This is the amount of money you’re required to pay upfront when buying real estate. The bigger your down payment, the smaller the mortgage you’ll need. For example, if you spend less than $500,000 on a home, you’re only required to put 5% of the purchase price down.

Mortgage Rate: This is the interest rate you’ll pay on your mortgage. This will determine how much you pay in interest over the life of your mortgage. Your mortgage rate may change depending on if it’s fixed or variable.

Closing Costs: These are expenses that you’re required to pay out of pocket leading up to your closing date. Examples of closing costs include legal fees, appraisal fees, title insurance, a home inspection, and movers. It’s a good idea to budget between 1.5% and 4% of a home’s purchase price towards closing costs.

It is VERY important to have a clear understanding of the implications when it comes to important factors to getting a mortgage and how it can affect you. It makes all the difference in future planning and can impact you in very significant ways.

At GLM Mortgage Group, we know what questions to ask. We have relationships with the lenders that you know about and the lenders you don’t. We would be pleased to educate you on the financial options available to you. We want you to make the best decision possible on the mortgage that you are committing to. Call us anytime for a FREE consultation on the mortgage products available to you.

The post Guide To Getting A Mortgage In 2022 appeared first on GLM Mortgage Group.

Banks VS Credit Unions

Finding somewhere to trust with your life savings and all personal information can be a big decision. Two of the most common types of facilities that are around to help are either Banks or Credit Unions. Banks VS Credit Unions… What is the main difference between the two you ask? To keep things simple, one of the biggest differences is that a Bank is FOR profit and a Credit Union is NON profit.  As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding the difference between Banks VS Credit Unions.

Banking is a financial system in which regulated institutions partake in accepting deposits, lending money, and transferring funds.

Canadian banking system groups financial institutions into five main categories:

• Chartered banks
• Trust and Loan companies
• The Cooperative Credit Movement
• Insurance Companies and
• Securities Dealers

The Big Five banks listed below dominate Canada’s financial ecosystem:

• Royal Bank of Canada (RBC)
• Toronto-Dominion Bank (TD)
• Bank of Nova Scotia (Scotiabank)
• Bank of Montreal (BMO)
• Canadian Imperial Bank of Commerce (CIBC)

In Canada, credit unions are regulated at a provincial level and either Provincial corporations or non-government insurers insure deposits made into the organization and can offer mortgages to borrowers who would not pass the current mortgage stress test. Yes, they can approve a mortgage application without a stress test.

There are many similarities between a bank and a credit union as a financial institution, which operates under similar regulations pertaining to loans, mortgages, and security. In terms of financial products, credit unions vs banks debate is irrelevant because you will likely find your banking needs at both credit unions and banks.

• Checking accounts
• Savings Accounts
• Loans
• Credit cards
• Mobile Banking
• ATM facilities

However, there are also a variety of differences such as:

1. Ownership
   1. The main difference of ownership between a bank and credit union is that Banks are for-profit and Credit unions are non-profit.
2. Membership
   1. Banks can do business with any customer if they do not have a history that challenges financial or legal regulations, whereas Credit Unions can only do business with their internal members.
3. Customer Service
   1. Banks offer 24/7 call centers with support available in multiple different languages. Credit Unions may not offer 24/7 support but usually can offer their members fasters personalized services at a quick pace.
4. Interest Rates
   1. Generally speaking, Banks do have lower interest rates than Credit Unions.
5. Fees
   1. Credit Unions often have lower and fewer fees than traditional Banks, however, Banks have more financial products in their portfolio.
6. Tax
   1. Banks are liable to taxation whereas Credit Unions are tax-free.
7. Regulatory Bodies
   1. Banks need to follow the guidelines and restrictions put into place by the following companies: Minister of finance of Canada (Finance Minister), Office of the superintendent of Financial Institutions (OSFI), Bank of Canada, Canada Deposit Insurance Corporation (CDIC), and Financial Institutions Supervisory Committee (FISC). Whereas Credit Unions are chartered and regulated provincially, that means they are subject to provincial deposit insurance regimes.
8. Insurance
   1. Banks provide insurance by the Federal Deposit Insurance Corporation (FDIC) and Credit Unions provide insurance by the National Credit Union Administration (NCUA).

There are several advantages of a credit union mortgage as opposed to a large, federally regulated bank…

1. Easier approval processes

This is primarily because credit unions hold the loans that they originate whereas banks often take mortgages off their own books by selling them to outside investors. As such, these investors are often the ones that influence the interest rate charged as well as underwriting standards. This means that banks will typically have far less power to be flexible with their lending in terms of the rates offered and who they can lend to.

2. Reduced rates

This member-focused mandate further helps mortgage borrowers to secure lower rates on their mortgages. Credit unions are largely designed to break even on their costs and are not taxed at a federal level.

3. Customer service

At a credit union, loan officers generally have a smaller portfolio of clients than banks. This enables a more personalized experience when originating a new mortgage.

4. No Mortgage Stress Test

That’s right! Credit Unions can approve a mortgage application without the need for a mortgage stress test. This does come with a slightly higher interest rate, but it still tends to be a lower interest rate than you would get from a trust company or a private mortgage lender.

If you have any questions, concerns or would like more information on Banks VS Credit Unions please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice.

At GLM Mortgage Group, we are with our clients for the entire journey. From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions.

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Mortgaging a Property via Assignment

Mortgaging a property via assignment is a contract provision included in some real estate transactions that allow the buyer to resell or transfer a property to another buyer before the deal’s closing date. As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding Mortgaging a Property Via Assignment.

This product was originally intended to give buyers a legal way of backing out of a purchase if for some reason their circumstances changed after they had put an offer on a property, instead of having to surrender their deposit. The clause was also meant to protect sellers, ensuring a sale would still go forward if another buyer could be found.

To qualify for a product like an Assigned Mortgage, there are some things you will want to first consider:

• Not all lenders offer to finance for Assignment Purchases
• Assignment Purchase products will contain the same features and conditions that you would expect of a traditional standard mortgage qualification
  • This means income and credit score requirements remain the same
• There will likely be additional documentation that will be required
  • Pertaining to the Purchase Contract and Contract of Assignment
• Some lenders will only finance on the original purchase price

The assignment clause allows real estate agents to sell a contract for a single property multiple times at increasingly higher prices as they make a commission on each transfer. Buyers in the middle also benefit by pocketing the difference between what they paid and the resale value. They also don’t pay any land-transfer taxes because the entire transaction happens before the deal officially closes, so the property is never technically in their possession.

The original seller receives less than what the property ends up being worth and the last buyer may be paying an inflated price, with the difference in value going to the real estate agent and the buyers in the middle.

The option of an Assigned Mortgage can be appealing to borrowers for a few different reasons:

1. Depending on how far along the process is, you could possibly be involved in choosing finishes of the property
2. Depending on your local market, you could score a good deal on an assignable property

The risk to individuals and developers, regardless of incorporation or not, is that the CRA is aggressive on assignments and will often investigate GST compliance long after the transaction has occurred. This leaves the taxpayer at high risk with a large tax liability if the sale of an assignment fee was not properly documented for GST purposes. As always, remember to consult a qualified tax professional with regards to your potential exposure and ensure that GST is reported correctly along the sequence of transactions.

Let’s look at this case study on Mortgaging a Property via Assignment together…

A real estate agent’s client reaches a deal to sell a property to an initial buyer for $1 million. The agent then takes that contract and resells it to a second buyer for $1.5 million. The agent in turn goes to a third and final buyer and sells the contract for $1.8 million.

For each transaction, the agent receives a commission. The initial seller receives $1 million minus the agent’s commission. The first buyer who bought the contract for the property for $1 million and sold it for $1.5 million pockets $500,000. The second buyer who bought the contract for $1.5 million and sold it for $1.8 million gets $300,000. The third buyer pays the land-transfer tax on the $1.8 million purchase price.

For any issues with Mortgaging a Property via Assignment please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice.

At GLM Mortgage Group, we are with our clients for the entire journey. From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions.

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Bridge Financing

Bridge Financing, also commonly referred to as a “Bridge Loan”, is a way to help literally bridge the gap between closing on your current house and your new place. This product allows you to carry the mortgage on two properties for a specified amount of time and for typically a maximum of 90 days. As one of the Top 3 Rated Mortgage Brokers in Vancouver, we would be more than happy to assist you with understanding Bridge Financing.

How does Bridge financing work? These short-term loan products use your current home’s equity to cover some of the costs of your new home (for example, could be used for a down payment.) That way, you don’t have to miss out on your dream home while waiting on the cash from the sale of your current house.

What is the cost of Bridge Financing? You will be charged an interest rate on the amount of funds you are borrowing. This will be based on the lender’s prime rate and will vary. You can expect to pay prime plus 2-5%. You can also plan to pay an administrative fee. This will vary pending on the lender and can range from $200-$695.

Similar to most other financial decisions, there will always be advantages and disadvantages for Bridge financing. Here are a few things you should be aware of:

One of the most popular advantages of acquiring Bridge financing is financial flexibility. With this product, you will be able to use the equity you’ve built in your current home to secure the new purchase of your dream home. Since you will be able to access those funds via equity, you won’t have to stress about the sale closing of your current home before you close on your new home.

Although most terms for Bridge financing products are short, the interest rate will be similar to open rate mortgages, which are often higher than the interest rate you may have locked in with your current mortgage. If for some reason your sale agreement falls through on your current house, you may have to make up for the payments until a new sale is finalized.

To qualify for Bridge financing you will need:

• Have a current mortgage in good standing with equity
• A copy of the Sale Agreement for the home you’re selling
• A copy of the Purchase Agreement for the home you’re buying
• Valid pre-approval (with document review) with the lender of your choice

Like your home buying situation, your home financing needs are unique. Bridge financing may be the right solution for you if you would like the following…

• You’ve found your dream property and do not want to wait on submitting your offer
• You can’t afford a down payment without the money from your current home’s equity
• You want time between closing dates

If you’re a homeowner aged 55 and over, rather than taking out a regular Bridge loan, you could take out a CHIP Open Mortgage with HomeEquity Bank. The CHIP Open Mortgage can assist you in purchasing a new home when your existing property has not yet been sold.

Let’s have a look at this case study together…

• Meet the Ellis family, a couple in their early 70s who live in the Greater Vancouver Area in a home worth $1.3 million. Looking to downsize, they’re keeping an eagle eye on available properties on Vancouver Island, and finally find their dream home at a price tag of $550,000. Afraid to lose it, they act quickly to purchase the new place before selling their existing home — but don’t qualify for a large enough traditional loan, putting the dream they have for their future in jeopardy.
• This product is a CHIP Open Mortgage (A Reverse Mortgage with no pre-payment penalties) The couple was able to access $600,000, allowing them to purchase their new place outright and cover the costs of their move. With no repayments, the couple were able to properly prepare their home for sale and repaid the CHIP Open in full once the house sold.

Please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice. At GLM Mortgage Group, we are with our clients for the entire journey. From the beginning, we can identify client needs, any possible roadblocks, and give a variety of tailored solutions.

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Our Discovery Call

A Discovery Call is our first touchpoint with your client. We make a quick 5–10-minute phone call to simply connect with the client and gather some basic information regarding a mortgage pre-approval. After we ask the client all necessary intake questions, we will either send them a link to our online application form OR create and give them a custom game plan for the future.

Once your client completes the online application, we will have a more thorough knowledge of the client, giving us access to the client’s Credit Bureau, etc… We will use these details to create a custom plan for your client.

A few questions that we will always ask during a Discovery Call are:

• Employment
  • Are they an employee or self-employed?
  • What is their annual income?
  • Do they receive any additional income?
• Property
  • What price range suits their needs?
  • Are they currently working with a realtor?
  • What type of property appeals to them?
• Credit
  • What is their credit like?
  • Have they ever had issues (past or present) with collections/bankruptcies?
  • Do you have any car/student loans?
• Down Payment
  • Do they have any funds saved for the down payment? How much?
  • Where did this down payment come from? How long have they had it?
  • Are they a First Time Home Buyer?

Our online application can be completed from your mobile phone, laptop, or tablet. Your client’s application stays “live” for 36 hours. To put it simply, this means that the application can be re-opened and closed at the client’s convenience to ensure all information is filled out in the given period. It’s not uncommon for us to send a reminder to your client to finish the app before the 36-hour deadline ends or reach out to us for any help.

Through every step of our Discovery Call process, we update both the realtors and clients. We provide the realtor a quick summary email giving our professional opinions on what we think their client can afford after we connect on the phone. We also update the realtor when the pre-approval is completed. As for the clients, they are receiving multiple calls/emails from us along the way keeping them up to speed. Our clients can feel at ease knowing that WE are on top of things taking care of them!

During our Discovery Call, when we are asking our intake questions, we can usually gather a rough idea of their projected purchase price with their liabilities accounted for.

For example:

• Every $20,000 of income earns approximately $100,000 borrowing power
• Every $13,000 of credit card/ line of credit debt subtracts approximately $100,000
• Every $400 monthly car payment subtracts approximately $100,000 borrowing power

Let’s review this case study…

Joe Smith earns $80,000 per year. His wife Sarah earns $60,000 per year. The total household income is $140,000 annually. This income is equal to $700,000 borrowing power. The couple has one car payment at $400 a month. They have about $6,000 in credit card debt collectively.

These liabilities decrease the couple’s borrowing power by $150,000, leaving them able to borrow $550,000. Joe and Sarah do have $75,000 in savings. We add their savings to their purchase power, and they are now able to look for properties in the price range of $625,000. Discovery call.

If having us reach out to YOUR clients for a discovery call is something you may be interested in, please reach out and one of our Senior Broker Partners would be more than happy to assess your unique situation and give you the best advice. At GLM Mortgage Group, we are with our clients for the entire journey. Fr

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At the end of January, the Bank of Canada held its target for the overnight rate at the effective lower bound of 0.25%, with the bank rate at 0.50% and the deposit rate at 0.25%. This means that the Bank of Canada rate stayed the same, which means variable rates will also remain unchanged for now. I know that many Canadians have been tuning in to the speculations and as Mortgage Brokers, we are receiving many questions about variable rates and how much longer they will remain this low.

Although the recovery from the COVID-19 pandemic has been strong in some regions, there are other regions where it has not been strong. The US economy is growing at an exponential rate, but China’s economy is struggling due to its weakness in its property sector. Globally, we also see a supply chain issue that has hindered production and is pushing up inflation to levels unseen since the financial crisis in 2008. Lastly, global tensions, specifically the Ukraine-Russian tension, are causing some uneasiness in the stock and crypto markets. 

Housing prices are currently very high, and the elevated housing market activity puts upward pressure on house prices. This will make it even more challenging for first-time homebuyers to enter the market. Buyers are facing high pressure, with multiple offers on property being the normal occurrence, some offers far above asking price and/or without subjects in place. As mortgage brokers, we are seeing the challenges our clients are facing when participating in this market. As the home prices rise due to this behavior, it makes purchasing (especially for first time buyers) more and more unattainable. 

Looking at the good news: oil prices have rebounded to well above pre-pandemic levels, and GDP growth in the second half of 2021 now looks to have been even stronger than expected. There has been strong employment growth, a tightened labor market, higher hiring intentions, and wage gains are elevating.

Although the COVID-19 recovery is far from over, there are a lot of positives to look forward to in the coming months. Life is starting to stabilize, and with that, the stock market, inflation rises, and housing prices could see a flattening out in the months to come. Inflation is likely to decline reasonably to 3% by the end of this year and ease back towards the target over the projection period. Expect longer-term inflation to go back to the 2% target. The bank will use its monetary policy tools to ensure that higher near-term inflation expectations do not become embedded in ongoing inflation.

While the pandemic has been very unpredictable from the start, we expect this stabilization to enter a longer-term stage alongside the economy’s growth. We expect the economy’s movement to be less affected by potential new variants in the future, but there is still the possibility that things could shift. 

We expect the Bank of Canada to increase the rates in March during their next scheduling meeting, and we will continue to update you as we hear more. We want to assure you to not stress over the potential Bank of Canada overnight lending rate. If you have a variable mortgage, you are paying significantly lower rates than fixed rates.

We are expecting a series of 0.25% incremental increases over 2022. If you are wondering how, it will affect you, let’s break it down:

If your Mortgage balance is 400,000 with a 30-year amortization, then for every $100,000 owing, your monthly payment will increase by about $13 – translating to roughly a $52 increase per month. 

If you are feeling uneasy about these increases, then did you know that there are variable rate products on the market that allow the payment to remain consistent while enjoying the benefits of the variable rate gamble? You can also lock in your rate and convert it to fixed directly with the lender which is a great option if you see variable rates rising and have reached your threshold.

These are big questions and if you have any questions at all, please reach out to us, and we will do our best to answer them in a timely matter. 

Uncertainty can be stressful and at GLM Mortgage Group, we are always available to answer questions and update our clients regarding their mortgage, current rates, and market conditions to make educated and informed decisions about their financial livelihood. 

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