Residential Mortgage Rates

With the latest Bank of Canada 25 basis point drop, it is a good time to discuss rates again. Remember that the rate announcement ONLY directly affects variable-rate mortgages. Fixed interest rates do not automatically change, as these are directly affected by daily bond yields. Since the media does not focus on these, they fly under the radar even though they fluctuate daily.

What Rates Apply to Your Transaction?

Before COVID, rate discussions with our clients primarily involved deciding between 5-year fixed or variable mortgage rates. The lending landscape has dramatically changed since then, and rate conversations are now (and should be) more about “Mortgage Strategy” based on individual circumstances and transaction type. Not everyone will qualify for the same rates as lending guidelines and pricing have become more complex and transaction-specific.

Details That Impact Mortgage Rates

Client Type: Are you a new or existing client with the lender?
Amortization Length: Are you taking a 25-year amortization or longer?
Property Type: Owner Occupied or Investment, # of Units, Usage, Size
Number of properties held
Back-End Insurance: Can the lender insure (securitize) the mortgage at their cost to reduce your rate?
Income Qualification: Are you qualifying using declared taxable income?
Debt Servicing Ratios: Do they exceed the standard levels?
Credit Profile: Both credit score and history.
Loan Amount: The size of the mortgage.
Mortgage Type: Is it a first or second mortgage?
Property Location: The property’s geographical area
Registering a property in a personal or corporate name

There are many other additional factors, too, making the days when we could provide a fast, accurate rate quote obsolete.

Online Interest Rate Marketing

Remember that the lowest possible rates are generally what you will see marketed online. Then, in small print somewhere on the page, something along the lines of conditions apply, or these rates apply only for default insured purchase transactions.

You will generally see a different rate if you do anything other than an insured purchase. An insured transaction means that the lender is protected in case of default. Therefore, they offer the best pricing as their risk is reduced.

Still, though, while rates are important, it’s only one piece of the puzzle. The wrong mortgage strategy (or product) with the lowest rate will often disappoint and eliminate any savings you hope to realize.

Always consider the importance of:

Mortgage Strategy
Full-Featured Product with No Restrictions
How the Lender Calculates Penalties
Amount of Mortgage Charge Registered on Title VS Loan Amount
Service Level as Your Time is Worth Money and Better Service = Less Stress

The person arranging your financing needs to understand your situation and goals to offer you the best possible options. Working with the right people ensures that you are well-equipped to navigate the complexities of the mortgage market and secure the best possible outcome.

Growth of Alternative Lending (B-Tier)

The alternative lending industry continues to grow significantly as banks and other A-tier lenders increasingly turn away new and existing clients for various reasons. B Tier lending offers more flexible lending guidelines in exchange for a higher cost of borrowing. In some cases, B lending is a long-term play, and in other cases, it is used as a stepping stone until the client can once again qualify for the best financing terms. Nobody wants to pay more for the money, but it often makes sense if it gets the job done.

Growth of Private Lending (C-Tier)

Private lending is another financing option when neither A nor B-tier lending is possible. The offering, once again, offers even more flexibility for a higher cost of borrowing. Depending on the situation, private lending can also be the financing solution of choice.

(Many High-Net-Worth Clients with Perfect Credit Use Both B Tier and Private Lending)

You always want to work with an experienced, skilled professional who can explain when and why this lending makes sense.

Interest rates and setup fees should be factored into the cost of borrowing.
Renewal Options – Will the lender renew if needed, and what will the cost be?
Open and Closed Terms – Is paying this off flexible, and what will that cost?
Exit strategy – Is there a realistic plan to transition out of private lending?

As with any lending, you want to ensure you compare apples to apples when comparing lending offers- especially with Private Lending. You want to make sure you know about all the costs associated with the transaction to reduce the chance of being told on closing that you are short funds to close, as this happens all too often due to all kinds of fees that can be added.

Private lending should always be a short-term lending solution (max 1 year)

A Tier Clients Being Pushed to the B or C Side

Investors with investment property portfolios face unique challenges today with traditional banks, as lenders deem investment properties risky for the following reasons.

Potential tenant payment issues.
Vacancy
Higher interest rates reduce property cash flow.
Tenants that don’t maintain the properties create expenses for the owner.

These are all common reasons banks want to limit how many investment property mortgages they have on the books. It has become increasingly common for clients to be told that their bank will not finance any further investment properties. Lenders will even decline to renew existing mortgages for clients with long-term relationships upon maturity, forcing these clients to explore alternative options.

Lending regulations and processes continue to become more complex and often frustrating. Our role is to help you navigate the options, make suggestions and set you up for success.

Remember, there is NEVER any sales pressure; it’s not how we do things.

Discussions are always calm, and all questions get answered, even those you may not think to ask. Once the transaction closes; we are still there to help when needed too.

Weathering the Financial Storm: Finding Your Way Forward

(For Real Estate Owners)

Nearly five years ago, COVID-19 struck like an unexpected storm, disrupting lives and livelihoods and leaving a trail of financial instability and stress. For many, the fallout persists today, amplified by poorly managed interest rate policies and escalating economic pressures. As a result, people are being inundated with online ads, email solicitations, and telemarketing calls from companies and individuals promising fast financial solutions. These aggressive marketing tactics collectively form a wide net designed (in many cases) to exploit moments of vulnerability. To make matters worse, the frequency of fraud and scams is surging, making it difficult for people to distinguish between legitimate opportunities and malicious schemes.

For many, the journey to financial recovery feels overwhelming and discouraging. Trust has become scarce, leaving people needing help figuring out where to turn or how to start rebuilding or restructuring. Traditionally, banks were the go-to resource for financial challenges. However, they have a reduced appetite for risk today and have become increasingly difficult to work with. This shift has driven significant growth in the subprime and private lending industry as more people seek alternatives. However, navigating these options on your own comes with substantial risks. A single misstep can lead to unexpected costs at best or finding yourself in an even worse position later that is difficult to exit from.

As a result, days, weeks, and months slip by for many individuals, with mounting stress as their financial situations deteriorate further. The longer these challenges persist, the more complex and difficult the path to resolution becomes. This relentless cycle leaves many feeling stuck and uncertain, making it increasingly difficult to find the confidence to move forward.

Experienced, Trustworthy Financial Guidance

The opportunity to engage in meaningful conversations with someone genuinely committed to helping within a calm, pressure-free environment can be a great way to navigate financial challenges and concerns. In such a setting, individuals can uncover what they may not know, ask questions, absorb important information, and ultimately make informed, confident decisions tailored to their unique circumstances.

As mortgage brokers, our roles extend beyond simply finding the best rates or helping those with bruised credit. We specialize in understanding the intricate connections between mortgage financing, unsecured debt, and tax arrears, and the nuances of how credit bureaus work. Our expertise enables us to discern what is and isn’t possible, and we strive to build a wide array of tools and relationships to support as many people as possible. Often, the most effective solutions involve debt reallocation, which requires meticulous planning and specialized knowledge. While financing purchase transactions is undoubtedly part of our work, a significant portion of what we do each year involves debt and credit restructuring, providing individuals with a path to regain control of their financial futures.

Loss of employment income, underperforming or failed businesses, health challenges, relationship breakdowns, investment property losses, unexpected project setbacks, tax arrears, monthly cash flow issues, accumulated debt, renovations, or investment opportunities are some of the most common reasons people seek to restructure their finances.

The takeaway here is that financial restructuring must be approached the right way. Making decisions with only partial information, limited options, or feeling like you are under pressure to do decide leads to choices that result in regret later.

Wrong Moves Can Make Things Worse

It’s natural to gravitate toward solutions that promise quick and easy relief when under financial pressure. These solutions can be seen as “patches” that defer financial problems, leaving you to face them again in 3, 6, 9, or 12 months, often in a worsened state.

Approaches to Dealing with Cashflow Issues that Frequently Backfire:

· Formal credit counselling, bankruptcy, or consumer proposals

· High-interest, unsecured loans

· Payroll advances

· Private mortgage financing

· Carrying high amounts of unsecured debt /making only minimum payments

We first aim to explore better, more sustainable alternatives, ensuring that decisions align with long-term financial well-being.

Our Process:

At the core of our approach is genuine care and a commitment to building long-term working relationships with each client. This philosophy allows us to go beyond quick fixes and provide clear, actionable strategies tailored to your unique financial circumstances. By taking the time to consider every detail carefully, we ensure that the solutions we recommend are effective and aligned with your long-term financial goals.

Assess the Full Picture

We take the time to understand your financial situation, including all assets, liabilities, income, expenses, goals and objectives. A thorough analysis ensures that every detail is noticed.

Simplify Complex Choices

We can then break down things into clear, manageable options. We will always explain the pros and cons of each potential option so that you can confidently make informed decisions.

Offer Effective Solutions

Our goal is to provide strategies that address both your immediate financial needs and set the foundation for long-term success. By helping you avoid common pitfalls and missed opportunities, we work to fast-track your recovery, rebuild your financial health, and enhance your overall stability for the future.

You’re Not Alone

If you’re feeling the weight of financial uncertainty, know that you are not alone and don’t have to face it alone. Avoiding the conversation only prolongs the challenges, while addressing them head-on is the first step. With the right people, proper guidance, and a personalized, well-thought-out plan, we can help you take that first step toward reducing stress and regaining control of your financial future.

Shopping with a Pre-Approval that Will Stand Up

It’s really disturbing (across the industry) to see how many people’s “pre-approvals” are NOT converting to “full financing approvals.” When a pre-approval falls apart, it affects everyone that is a party to the transaction. It’s often embarrassing, frustrating, and stressful for the purchaser, and the truth is that it can almost always be avoided. The key to not finding yourself in this scenario is to ensure that the person you have engaged to do the pre-approval both knows how to do one (correctly) and is willing to invest the time, money and resources to do so.

Unsuspecting Buyers Are Increasingly Getting Into Trouble

(It’s Not Their Fault)

While it may not sound like it makes sense, a Pre-Approval Letter from any bank or brokerage is not worth the paper it is written on if the procedure was not followed correctly.

In the same way, a “Mortgage Committment Letter” with unfulfilled funding conditions is also not worth the paper on which it is written if the conditions cannot be fulfilled to the lender’s satisfaction.

Working with a bank employee, mortgage agent, or broker at a well-known mortgage brokerage does not guarantee that an application for pre-approval or approval will be completed and processed correctly. It should, yes, but it doesn’t translate in reality.

In all honesty, if you don’t ask yourself at some point during a “properly done” financing approval process whether all of this information and the paperwork being requested is necessary, then chances are pretty good that the person managing the process is either missing or skipping steps.

Red Flags

Being told traditional mortgage financing can be done in less than 30 days
Not being asked for paperwork to confirm both income and down payment during a pre-approval process.
Being referred to an online calculator for your pre-approval

In today’s lending environment, the lender’s credit department (where the decisions are made) will only thoroughly review a mortgage application if every required supporting document accompanies it. The information recorded in an application carries no weight unless it can be supported by specific documents as requested by the lender. Every lender requires the same supporting documents with very minor differences, if any. The “blue lender” doesn’t make it easier to get approved than the “green or orange lender” does. If you hear anything contrary, this should also be a Red Flag.

When the person you are relying on to arrange your financing either misses or even skips steps to make it easier for you, you may be investing both your time and money under a false sense of security, only to find out later in the process (possibly on the day of funding) that your mortgage lender is not prepared to fund. It is remarkable how many people only find out a day or two before their closing date that they do not have fully approved financing.

When financing falls apart, the borrower is left to choose between defaulting on their purchase, asking friends or family for help, or securing expensive private lending financing to close their transaction.

We don’t want to see this happen to you.

Don’t hesitate to reach out at your convenience; we actually do care 🙂