The dicotomy of between O’Leary Mortgages and mortgage brokers?

There has been much uproar in the Canadian mortgage community about Kevin O’Leary and the creation of O’Leary Mortgages.  Many mortgage brokers are upset that his mortgage product bypasses mortgage brokers and "trivializes" our role. Personally, I welcome O’Leary Mortgages into the mortgage mix. Hopefully his mortgage product can make its way into Quebec. Kevin's profile will bring more attention to the mortgage industry.

I love my job as a mortgage broker but for the average person mortgages and debt is still a mystery. Here is where a mortgage broker should be instrumental. Our role is to find the right mortgage for our clients' needs but also guide our clients to pay down their mortgage, help our clients' manage their debt, how to fix/maintain one's credit, among other things within the box of our mortgage license.

Whether you love him or not, Kevin O’Leary is successful and appears to be an advocate for the broker model. Kevin is correct in the broker model is not the sole model of delivering mortgages to the consumer. Let's face it if a client wants an ING mortgage they can apply directly online to ING. I think that Kevin is challenging our profession to do better. As a profession we must provide value of our client today, on an ongoing basis and in the future. "#Being awesome," Scott Stratten shares in his book The Book of Awesomeness is critical.

Scott Stratten's presentation about Awesomeness at the Mortgage Forum 2012 in Vacouver

Scott is an advocate for quality of product but more importantly that we are in an age demanding excellent customer service. As broker we must provide exceptional customer service and value as this is what will keep customer's returning to you rather than just rate. Clients get it and need that advice! But it's up to us to keep stepping up and evolving with the times whether it delivering on service, banking developments or technology. Hence why I say I support O’Leary Mortgages. As mortgage brokers we need to continue evolving and provide value to customers. O’Leary Mortgages will also bring more attention to the mortgage brokerage channel. After all, approximately 44% of overall Canadians actually use our services.

CAAMP Mortgage Conference Review

I just returned from spending a few days at the Mortgage Forum 2012 in Vancouver. The event is organized by the Canadian Association of Mortgage Professionals or CAAMP. Before I left for the conference I told all my clients and friends that my mom let's me go to CAAMP. Gotta love bad mortgage humor...

CAAMP stage for the marketing & customer service panel

This Forum is held annually and herds mortgage brokers, banks and other service providers all in the same conference center from across Canada. This year several panels were created that discussed the direction of the mortgage industry, the direction of the Canadian economy, mortgage client customer service and marketing. First and foremost the economist panel pretty much all agreed that they do not foresee rates going up anytime soon and if they do it would be a small increase. So everyone out there don't worry about rates going up especially if you are looking to buy for next summer or refinance.

In previous blog entries I raised concern about Canadian household debt. After his panel, I informally chatted with Carlos Leitao from Laurentian Bank, more about debt and income levels. Carlos mentioned that unsecured debt was not a problem in Canada yet he did not mention about secured debt. I also asked Carlos about Canadian wages which he agreed wages have not increased accordingly.

 

Bank economists discussing state of Canadian Economy (hosted by Amanda Land; economists: Warren Jestin from Scotiabank, Carlos Leitao from Laurentian Bank, & Stephane Marion from National Bank)

What was most remarkable about the conference was the panel on public perception and customer service quality. Based on stats presented by Rob Daniel from Maritz Canada, only about 44% of Canadians use a mortgage broker. This tells us that we as an industry are still not getting the word out about our role and the value we provide. Clients that do use a mortgage broker statistically appear to be pleased with our work but we need to continue to communicate with our clients after they have received their mortgage.

Host Amanda Land asking a question to Rob Daniel

The last part of the Forum focused on marketing, customer service and role of technology in business. David Usher launched the discussion speaking about creativity, virtually everything is learn-able and that in every business fear is what drives our personal limits.   

David Usher speaking and later singing

Randi Zuckerberg speaking about her experience building Facebook with her brother

Biz Stone sharing his experience building Twitter and role of philanthropy in marketing

The discussion was quarterbacked by Scott Stratten who spoke about social media being a conversation and communication vehicle.

Overall, the event was well worth attending but also eye opening. The experiences shared by Biz Stone, Randi Zuckerberg, David Usher, Mitch Joel and Scott Stratten have helped me realize a few things in terms how to cultivate better customer service and relationships.

Canadian mortgage changes

As a mortgage broker, when it comes to my client's finances I try to remain genuinely objective and look out for their best interest. Frankly, I don't agree with all the changes but I am glad to see that the Federal Government has finally introduced a couple mortgage changes such as reducing home equity lines of credit (aka HELOCs) to 65%.

I can appreciate that housing prices are outrageous in many parts of Canada but I think Quebec pricing remains fairly reasonable. For the most part I think appraisers in the Montreal area are "conservative" for the better. I'm curious to see the impact of the new rules here in the Montreal-area especially with the condo market.

By dropping amortization from 30 to 25 years it seems lower income earners will be eliminated from buying in the short term to medium term. This may not be entirely bad. On the other hand, I am most concerned about recent home buyers that put 5% down, took 30 year amortizations, fixed shorter terms (1 to 3 years) and incorporated lots of over-time and bonus income as part of their income calculations. I've blogged that repossessions in Montreal remains fairly low however I think in the coming years bank repossessions will grow. 

Flaherty Announces New Mortgage Rules

Yesterday, Mr. Flaherty, Finance Minister,  made some aggressive changes to the mortgage rules in an attempt to slow down the rate that people are borrowing on home equity and to slow down the real estate market.
 

Here is a summary of the changes:

1) Amortization reduced from 30 down to 25 years on government backed mortgages (i.e. insured mortgages)
2) Max Loan To Value for Refinancing 80% of your home's market value
3) No CMHC backing for Properties over $1M (client must put down 20%)
4) Gross Debt Service ratio increased to 39% Total Debt Service ratio remains at 44% 

Please note as a repercussion of this announcement today the banks will start to implement the new rules over the next couple of weeks to meet with the July 9th deadline. Mortgages that have already been approved and are in the process of being funded will not be affected by these changes however any future transactions will have to be qualified under the new rules.

The question is: What does this mean for the average Canadian? The government believes that this will help halt an ever increasing housing market and will stop Canadians from using their homes as ATMs to pull cash out of equity.

It remains to be seen if the banks will continue to offer 30 and 35 year amortizations on non government backed mortgages. The government believes that only 5% of Canadians will be affected by these new rules.We did have some good news today as well with respect to these changes. Canadians will still be able to secure a home with only a 5% down payment as well as the increase in the GDS ratio will allow more room for certain families to qualify for homes.

As always I am available to answer all your questions please feel free to contact me. Have a good long weekend everyone.

Habitat for Humanity Montreal needs our help

Hey Everyone, from time to time I help out at Habitat for Humanity Montreal. They do some amazing work here in Quebec by building home for those less fortunate. Habitat Quebec has a Montreal-based retail hardware store, called the ReStore where sales proceeds help fund their builds. The products that are sold in the store are donated by suppliers. I'm on the hunt to help find more suppliers that can donate overstock products or renovation materials. Also, on a weekly basis Habitat rents a truck to pick up donated products. The monthly rental costs are incredible. My second mission is to help find a 19 foot truck that can be donated or loaned on a "long-term" basis. If anyone can help me out that would be incredible and would make a huge impact for Habitat.

Thanks. Have a good rest of the week.

Mortgage Summer Refresh & HELOC Changes

Yes I know I’ve been bad lately with blogging. Believe me I’m not saying that mortgage news has been slow rather the opposite. Lots on the go and there is talk of more Government changes related to mortgages and HELOCs (aka home lines of credit). Presently, if you wanted to buy or refinance your mortgage and home of credit can be combined up to 80% LTV (loan to value). In other words, you can receive a combination of mortgage and line of credit up to 80% of the market value of your home. Hence the majority of that 80% on a home mortgage could heavily consist of a home line of credit. In an effort to lower Canadian debt the Government is implementing new mortgage rules. It appears we will still be able to attain the 80% LTV financing, through max 65% heloc and 15% mortgage. Interest only payments and no amortization schedule will remain.

Frankly, I’ve never been a fan of helocs. Taking on a home line of credit needs to be calculated and the rationale needs to make sense (ideally short term). Helocs in my opinion are too easily accessible and once loaded they harm your credit score. It is unrealistic for most people to pay off a 100k loaded heloc unless you refinance your home, sell or win the lotto. So yes, I partially welcome new Government change. This change is supposed to take place later this year and we await the final Government guideline.

If you have any mortgage questions let me know.

North East Mortgages in the news: "Brokerage benefits from RBC?"

Wow Vernon Clement Jones from MortgageBrokerNews, just wrote an article about North East Mortgages and Terry Kilakos (Founder and President).

"Try not to snicker, but one brokerage has found a way to piggyback off of RBC’s success, relocating to a storefront the bank only recently vacated after 30 years.

“I don’t think they knew it was being leased to me,” said Terry Kilakos, a chartered Mortgage Broker and owner of VERICO North East Mortgages in Montreal. “All’s fair in love and war, though, and this location is not only great because it`s a corner lot on a high-traffic area, but it’s been identified as a bank for decades in the minds of consumers, which should help grow our walk-in traffic.”

That’s usually why banks vacating old branch locations avoid selling to other financial services players.
In fact, they frequently rely on sales agreements holding the buyer to a moratorium on that kind of business for as long as five years. Kilakos is leasing from the new owner of the stone-clad building and hasn't entered into any agreement with the bank.

He moves into the leased 3,000 sq.-ft. spot at the heart of Montreal`s Saint-Laurent borough on April 1."

To read more check out the rest of the article...

How can I buy after bankruptcy?

A huge part of being a mortgage broker is being an advisor and mortgage educator to my clients. This is especially true with first time home buyers.  Buying your first home is an important decision and some careful planning should go into it. After all it may take a couple years to save up for the down payment or stabilize one’s career.

For example, I met with a couple last week whose goal was to buy in the Chateauguay area in the next 3-5 years. Both are hard working salaried people. The catch was that one had a bankruptcy and the other had a collection. First we had to tackle the bankruptcy, meaning the client was discharged from bankruptcy but had no new credit history. I advised that a secured credit card be opened to start building credit history. As mentioned in previous blogs, the goal here would be to establish two major trade lines, with limits of $1200 each and two years of positive history with no late payments. In terms of my other client with the collection, we had to ensure that the collection was paid off ASAP and that she continues to pay the rest of her cards on time. It would not take long for her credit score to bounce back. Ideally, once the collection is paid off the banks like to see stable and no lates for a good 1-2 years as well.

This is a good example of mortgage planning and something that I will monitor with these clients over the next several months. We need to ensure that the secured credit card is reporting properly on the credit report. It will take the clients’ at least two years to rebuild credit but fortunately they are not in a rush as they also need to save up their down payment.

I welcome any mortgage questions or comments. Have a great week everyone.

What’s my buying capacity? Maximum versus reasonable

Probably the number one question I get asked as a mortgage broker is “Hey Mark, what’s my buying capacity?” As a first time buyer or even a repeat buyer your buying capacity is mission critical. With my weekly column in the Hudson Gazette and my blog montrealmortgageblogger.com, I’ve received quite a few calls from home owners that are over their heads with mortgage and debt payments. It’s always good for the ego to see our maximum buying capacity, but does it make sense to stretch it that high? I will tell you from several horror stories that I’ve seen the past three weeks, clearer it’s not worth it.  

Your buying capacity is based on a couple mortgage calculations, one in particular referred at TDS or Total Debt Service ratio. Typically all Canadian banks use this calculation. This calculation takes a look at your annual expenses namely school and municipal taxes, home heating, and your personal debt load and is divided by your gross income (combined if you are a couple and a portion of your rental income, if any) multiplied by one hundred. On an insured purchase meaning your putting less than 20% down payment, your TDS can go up to 44%. Depending on the lender a refinance the TDS can range from 40-44% whether you are refinancing conventionally (up to 80% of market value of your home) or insured (85% of market value).

First and foremost if you are buying or refinancing mortgage planning is invaluable. You will not always get that detailed service at the branch-level at a bank. That statement is not intended knock the banks but one needs to be careful and budget conscious. A good mortgage broker can help you establish a plan and keep you on budget. What I mean by that is take a much closer look at that TDS calculation. TDS is a crude ratio and does not take into account a lot of your other annual expenses such as insurance, school tuition for the kids, food, gas, etc. With that in mind you can create a reasonable buying capacity. Lastly, when taking your income into account typically I look solely at base incomes and if appropriate exclude or take an average of your over time, bonuses and commission. I treat those as sugar because they can all disappear or fluctuate tremendously in this economy.

If you have any questions or would like to share a mortgage experience, I’d love to hear from you. Have a great week.

Doing some work with the Montreal ReStore

Helping to organize the ReStore today. Love the cause but need some volunteers please

Choosing the right fixed mortgage

If you looking to buy or refinance in the near future then it's not a bad idea to take a closer look at what mortgage term your considering. The big banks have spent a lot of advertising dollars to attract us to sign on for shorter term mortgages (1, 2, 3 and even 4 years). I'd argue given current economic circumstances this may not be the ideal strategy.

Clearly no one knows where the economy and rates are headed but there is some consensus that recovery will arrive in the next two years or so. If you buy into a short term fixed rate then you may be re-signing as rates begin to rise again. That may not be ideal. Currently the seven and ten year fixed rates are very attractive and not much higher than the five year fixed rates. Clearly it’s important to think ahead whether you’re planning on hanging onto the house for the next five years or more.

More and more Canadian statistically break their mortgage before their mortgage term is up. Here are some penalty tips to keep in mind. If take a seven or ten year fixed and you sell or refinance your home five years into your term then penalty to break would only be three months interest penalty. This rule applies to all banks at its part of the Interest Act of Canada. If you think you will break your term before five years then it may be wise to take at least a five year term or less.

If you have a mortgage, debt-related questions or would like to share an experience, feel free to contact me.  Have a great week.

Mortgage conference in Montreal

@ a mortgage conference today in Montreal hosted by all the lenders I work with. I try to attend these things as much as I can. Believe it or not the mortgage industry changes regularly, maybe not daily but often! It's also a good way to spend time with my banks and the people behind the scenes that make my mortgages happen

Quick mortgage and buying tips for first time buyers

Are you thinking of upgrading your home? Are you tired of renting? Wellit’s definitely not too late as the buying season is upon us. Here are couplequick tips to keep in mind:

Tip #1: Make a personal budget. If you’ve been renting all yourlife and now looking to buy then it’s not a bad idea to put pen to paper andget an idea your monthly expenses.

Tip #2: Get a mortgage pre-approval with a mortgage broker.  A mortgage pre-approval will give you a good ideaof your buying power. Look closely at your future mortgage payments, taxes,heating, and new home insurance costs. Ask yourself, does this make sense? Doesthis fit within your personal budget?

Tip #3:  Save for a downpayment. Try to save at least 5-10% of your purchase price. You also canconvert your RRSPs to help you with that down payment. Did you know you can useup to $25,000 per applicant? If you only have a little aside but not enough fora full 5% then consider a "cash back mortgage" but look at the fine print.

Tip #4:  Build good credit.Credit is very important. As a first time buyer it’s a good idea to have atleast two major trade lines for good two years. Hmm I think I've said this before...pay your credit cards on time. Watch your limits. And keep those creditinquiries in check. Too many can definitely effect your credit score.

If you have a mortgage, debt-related questions or would like to sharean experience feel free to contact me.  Havea great week.

Genworth and CMHC Mortgage Assistance Coordinates

Hey everyone, I had a quite a bit of feedback and calls in response to my blog post related to Home Owner Assistance Programs. Thanks for the feedback and glad to hear that the information was useful. I got a couple calls requesting Genworth's and CMHC's mortgage assistance coordinates. I thought I'd post them in case others might need them too. If you don't remember if you are insured with the CMHC or Genworth then simply call your bank and ask. They will know.

Genworth Financial Canada
1-800-511-8888
http://www.homeownerassistance.ca

Canadian Mortgage and Housing Corporation (CMHC)
1-866-358-9999 and ask for a default agent or "agent gestion défaut"

Tips on how to improve your credit score

Managing your personal debts is often on our minds but have you thoughtabout your credit report? I met with a client over the weekend who told me he’snever seen his credit report. So we pulled it together and had a look. To hissurprise his score was in the 640s which is decent but clearly he could havebeen over 750. The credit system in Canada is an algorithm that tracks ourconsumption of credit. This “points system” ranges from 300 to 900 points. Ideally,to get mortgage with a top bank, meaning best rate but also favourable conditionsshould be generally above 650.

Tip #1: Watch your credit limits. In this gentleman’s particularcase he had maxed out all his lines of credit personal and secured. I am not afan of lines of credit as it’s very easy to spend the money and once you exceed50% of your limit then your score begins to drop over time.

Tip #2: Watch out for those pesky credit checks. Every time you applyfor a cell phone, satellite TV, a retail card, and even your contractor maypull a credit check on you. They need your permission but they don’t alwaysask! Too many checks in a concentrated period of time can drop your scoresignificantly.

Tip #3: Pay on time and pay at least your minimum. Sounds simplebut pay all your credit cards, car lease, lines of credit and even that cellphone bill on time. Remember even a wire transfer of funds can take 3-5business days to clear. The credit report tracks payment history for 6-9 years. If you have any collections take care ofthem ASAP.

If you keep all three factors in check then your score will increase butkeep in mind positive results are not real time rather can take 2-4 months adjuston your report. If you have a mortgage, debt-related questions or would like toshare an experience feel free to contact me. 

Are you new to Canada and looking to buy here?

I hope everyone’s had a great week. The days seem to fly by don’t they? No doubt havinga mild winter helps. Lately, I’ve come across new immigrants andindividuals on work permits that have been looking to buy in Canada. Oftentimes it is not straight forward to find a mortgage. Using a mortgage brokercan help to quickly access your situation and choose the right mortgageproduct. Often times such families or individuals have no or little credithistory in Canada, or may be on be on contract rather than full time salariedemployment.

Some banks have issue with contract employment but don’t get discouragedas options do exist.  In cases like this youmay be required to put between 15% and 35% down depending on your specificcredit and employment circumstances. Something to keep in mind, if you aremoving down payment funds from abroad to Canada you will want to have the fundshere in Canada prior to having an accepted offer on a property. In most cases,you will not receive a final mortgage approval until the funds are in aCanadian bank account. Simply demonstrating that you have the funds abroad maynot be sufficient and you run the risk of losing that property.

If you have a mortgage, debt-related question or would like to share anexperience feel free to contact me. 

Homeowner Assistance Programs

Hope everyone’s had a good week. In this week’s blog, I’dlike to talk a little about mortgage assistance programs. Mortgage assistanceprograms are aimed to help Canadian homeowners who are having temporary trouble making their mortgage payments. Common situations like job loss,reduced income, marital separation, or unexpected illness and disabilityclearly contribute to one’s ability to their mortgage. In order to qualify forsuch programs you first need to have had bought or refinanced your home witheither the Canadian Mortgage and HousingCorporation (CMHC) or GenworthFinancial which are the two major mortgage insurers in Canada. In otherwords, you needed to have picked up some mortgage or aka default insurance inthe past.  

If you find yourself having trouble paying your mortgage dueto one of the reasons listed above then its best you speak to your bank aboutyour options. I suggest this be done before you becomes late on payments and itbecomes a problem. Together your bank and your insurer will discuss yoursituation and if possible create a plan that helps you out. The mortgage insurershave specialists that deal with such matters. Some options permit you toincrease your amortization, defer payments or even create a shared paymentplan.

I don’t think enough homeowners are aware that such programsexist.  If you feel you need assistancewith your mortgage I would be more than happy to guide you to the best of myabilities regardless if you become a client or not. I am more interested inhelping you get back on track. After all there are bigger things to worry aboutin life.

If you have any specific questions or good and badexperiences you’d like to share please feel free to contact me. I welcometopics for next week’s blog.

Ready for 2012 & Habitat for Humanity Announcement

I hope everyone has slowly gotten back into gear and that2012 is off to a good start. I took some time over the holidays to relax but also met with a few clients. One family that I met with had decided to take the plunge and build their own house five years ago in Saint Lazare. Now they were looking to renew their mortgage and pay off some debts. Let me tell you the house was very impressive and a good example how building your home with a contractor is possible! My client went to the bank herself to get the construction mortgage. She said her experience was mixed and she didn’t get the guidance she expected nor was the process clear.  Speaking to a mortgage broker about a new construction helps with not only planning but understanding all the steps involved in building a home in phases. 

Secondly, I wanted to take a second to announce a new initiative that we at North East Mortgages are working on. We have partnered with Habitat for Humanity Montreal and the Habitat for Humanity Montreal ReStore(http://habitatmontreal.qc.ca/en/restore).Many people know about the valuable contribution Habitat does in building homes but few have heard of the ReStore. Yes, I know it’s based near Atwater Market in Montreal but it’s worth the drive from the West Island, Saint Lazare or even Hudson. The ReStore is one of Montreal’s best kept secrets where manufacturers and hardware stores donate hardware goods from paint, sinks, and anything else you can think of when renovating.  The prices are incredible low and proceeds get pumped back into Habitat so they can keep helping people. Please check out their website and location.

Habitat for Humanity

Hey everyone wanted to announce that North East Mortgages is now partnered with Habitat for Humanity Quebec and their awesome ReStore (http://habitatmontreal.qc.ca/en/restore). The ReStore is a retail hardware store thanks to the generous donations from distributors, retailers, manufacturers, and construction companies to support Habitat for Humanity's mission. The ReStore carries everyday construction materials and products we all need for our home. You will be shocked by the low prices! The ReStore is really the city's best kept secret.

I am really excited to work with this cause as I have seen the benefits of their work when I lived in Maine. Please stay tuned to more announcements and events.