Rock-bottom interest rates…how do you get one?

Posted on October 23, 2023October 23, 2023 by markogel@gmail.com

(Oct 23, 2023)

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In today’s Canadian mortgage landscape, one thing has the power to captivate the attention of economists, investors, and homeowners alike: rock-bottom interest rates. Whether you’re a first-time homebuyer hunting for your dream home or a seasoned investor looking to optimize your portfolio, the allure of historically low interest rates is undeniable. But have you ever wondered what’s behind it all? Which applicants get the best mortgage rates, and why? What is the one common factor that binds these rock-bottom interest rates together?

Let’s embark into the world of these exceptional mortgage rates and explore the three main forces that have led to their rock-bottom pricing. And more importantly, let’s determine if YOU are eligible for rock-bottom interest rates!

1. LOAN-TO-VALUE (LTV) RATIOS:

Loan-to-Value (LTV) ratios are a critical factor when it comes to interest rate pricing, but their influence can be somewhat perplexing. LTV ratios are as straightforward as they sound: it’s the ratio of your mortgage amount to your property’s value. For instance, if your property is worth $500,000 and your mortgage is $400,000, your LTV ratio is 80%. Mortgage rates tend to deviate within three key LTV ratio bands: (i) 65% or less, (ii) greater than 65% but less than 80%, and (iii) over 80% up to 95%. While you might expect that the more skin in the game, the better the rate, this isn’t always the case. Surprisingly, it’s the 80.01% to 95% band where you’ll find the rock-bottom mortgage rates. That’s right, the applicant with the least amount of down payment gets rewarded with the best interest rate! You’re probably asking, how does this make sense? Why would the applicant with the least amount of down payment get the best interest rate? To understand this paradox, let’s move on to the next factor, insurability.

2. INSURABILITY:

Within the three LTV ratio bands (65% or less, 65.01% to 80%, and 80.01% to 95%), the middle band, 65.01% to 80%, has the highest mortgage rates. Here’s the intriguing part: you’d assume that as the LTV ratio decreases, your interest rate would improve, and you’re correct in that assumption. However, in the 80.01% to 95% LTV ratio band, where you’d expect higher rates due to lower down payments, the situation is different. This band receives the best interest rates because mortgages in Canada with LTV ratios above 80% require insurance. Anytime you purchase a property with less than a 20% down payment, you incur a premium on your mortgage, ranging from 2.80% at 80.01% LTV up to 4% at 95% LTV. This premium insures against the likelihood of default, making these mortgages low-risk for lenders. The lower LTV band (65.01% to 80%) is often the highest-priced mortgage rate arena, as it’s uninsured and somewhat vulnerable to extreme market downturns. It is not until you reach the lower loan-to-value thresholds (below 65% LTV) where the risk factor essentially diminishes and the interest rates finally match those of the insured price bands.

3. PURCHASE PRICES:

Lastly, property values play a pivotal role in the rate-pricing criteria. All the factors mentioned apply to properties valued under $1 million. Once a property surpasses this threshold, Canada’s insurers no longer protect the mortgage against default. The coveted 80.01% to 95% LTV band, with its highly discounted interest rates, ceases to exist. For properties over $1 million, mortgages are not insurable, and the minimum down payment increases to 20% or higher, depending on the purchase price. For instance, a common sliding scale involves an 80% LTV up to $1.5 million, followed by a 60% LTV on the balance thereafter. With properties over $1 million, further risk premiums come into play due to the absence of insurability. Although an official 65.01% to 80% LTV pricing band doesn’t formally exist at this scale, lenders do eventually reach a comfort zone where their interest rates eventually match the interest rates offerings you would typically associate with the 80.01% to 95% LTV band.

To sum it all up, here’s an example of how many interest rate pricing variations one could expect for a 5 year fixed rate (as of today’s rates, Oct 22, 2023)…these are just a few pricing scenario examples, there are several more not accounted for in this illustration:

SUMMARY:

The world of mortgage finance is a complex landscape, and understanding the factors that influence interest rates is crucial for homeowners and investors alike. Loan-to-Value (LTV) ratios, insurability, and property values are the key driving forces behind rate pricing, and they often defy common expectations. While a higher down payment may not always guarantee better rates, the presence of mortgage insurance can actually lead to more favorable terms. Property values, especially those exceeding $1 million, introduce additional complexities in rate structures. Lenders carefully weigh the risk factors in the quest to balance competitive rates with prudent lending. By unraveling these intricacies, borrowers can make informed decisions, ensuring that they secure the most favorable mortgage rates aligned with their financial goals. The mortgage industry’s subtleties, as we’ve explored, reveal that it’s more than just numbers; it’s a dynamic interplay of financial algorithms and calculated risk.

DISCLAIMER: For the sake of brevity, this post does not cover all interest-rate-influencing factors (for example, amortizations, occupancy status, and self-employment have an impact on interest rate pricing, but have not been discussed in this post). The key takeaway is that not all interest rates are created or offered equally. To ensure you receive the best possible rate, reach out to Marko Gelo for a brief summary analysis of your options. Call or text at 604-800-9593, or schedule a call with Marko at your convenience.

Wondering if you are eligible for rock-bottom interest rates? Call or text Marko Gelo right now to secure your rock-bottom interest rate at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

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604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

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Email: gelo.m@mortgagecentre.com

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InTheNews- What today’s rising bond yields mean for your mortgage rates

Posted on October 3, 2023November 3, 2023 by markogel@gmail.com

(Oct 3, 2023)

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Since September 14th, Canada’s 5-year bond yield has increased from 3.96% to 4.30%. What does this imply? Bond yields have a direct correlation with fixed mortgage rates, meaning that when yields rise (as they are presently), mortgage rates also increase. The same holds true in reverse. When widespread bond sell-offs occur (as they are now), their prevailing yields increase.

Why are bond yields increasing?

There are a few reasons why bond yields increase:

Widespread bond sell-offs happen when bond investors anticipate rising interest rates…these higher interest rates result in lower bond prices (higher yields) which trigger bond holders to sell in order to avoid capital losses.
Changing economic conditions also contribute to widespread bond sell-offs. If investors believe the economy is improving and becoming less reliant on accommodative monetary policies (such as low-interest rates), they may sell bonds and move into other assets they perceive as offering better returns or growth potential, such as stocks.
Rising inflation expectations can trigger a bond sell-off. When investors anticipate higher inflation, the fixed interest payments from bonds may become less attractive in real terms. To protect their purchasing power, investors may reduce bond holdings.
Central bank policies play a significant role in the bond market. If central banks signal a shift toward tighter monetary policy (e.g., raising interest rates or reducing bond purchases), it can lead to a bond sell-off as investors adjust their portfolios in anticipation of these changes
Periods of increased market volatility can lead to bond sell-offs as investors seek to reduce risk and seek shelter in more stable assets. This can be particularly true during financial crises or significant economic uncertainties.

The Bottom Line:

Bond yields affect mortgage rates. The market is extremely volatile and as a result, isn’t reported on a daily basis in great detail (it is, but only financial nerds follow it…it certainly isn’t a fun/interesting story line for general public news/media consumption). While most people are focused on the Bank of Canada’s recent (September 6) or upcoming (October 25) interest rate announcements, the bond market is rapidly establishing new benchmarks for fixed mortgage rates. It’s fast, confusing and occurs in real time, hence, the media’s hesitation to provide made-for-general-public news blasts on it as the reporting for the day can quickly become old news within an hour of its release.

If this current pattern persists over the next few days, expect fixed rates to increase by another 0.15%-0.20%. My bet is that It’s quite likely that rates will begin another upward trajectory by the end of this week.

What should I do?

If you are refinancing/renewing: start your mortgage renewal inquiry as early as 6 months prior to your maturity date. During the initial two months, we’ll work on updating your application profile and getting it ready for the competitive marketplace of lenders. Once we reach the 4-month rate hold window, your application will be primed and ready. At this stage, we’ll pitch your application to multiple lenders, putting you in the spotlight where they’ll vie for your business. The last thing you want to do as you approach your renewal is nothing. Reach out to me via email or phone to kick-start your mortgage renewal process today.

If you are purchasing: analyze your finances and cash flow to see if buying in the current environment is feasible. While you may not be thrilled with today’s interest rates, keep in mind that you will likely renew at a rate in the future that could be 20%-40% lower. However, the same cannot be said for the real estate market…I don’t see property values plummeting 20-40%. Buying in today’s environment is not stupid and unwise, you simply need to proceed with tact and strategy.

If you are renewing, refinancing or acquiring a property in the next 6 months, call me right now to secure your rate hold. Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko.

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Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text/WhatsApp | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Email: gelo.m@mortgagecentre.com

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Time is Running Out: Repay Your CEBA Loan and Save with Mortgage Refinancing

Posted on July 15, 2023July 15, 2023 by markogel@gmail.com

(July 14, 2023)

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If you are one of the 1.4 million business owners in Canada who received a Canada Emergency Business Account (CEBA) loan in 2020, it’s crucial to be aware that the deadline for loan forgiveness eligibility is quickly approaching. By December 31, the loans up to $40,000 can be eligible for a 25% forgiveness, while loans greater than $40,000 can be forgiven up to approximately 33%.

Loan Default and Interest Charges:

When December 31, 2023 arrives, if you are unable to pay 63-75% of your loan balance (depending on the loan size), your CEBA loan will fall into default, and interest charges will begin. Starting on January 1, 2024, you will be required to make interest-only payments until December 31, 2025, by which time the full balance of your loan must be paid.

Loan Forgiveness Calculation:

Let’s consider examples to illustrate the loan forgiveness calculation. If you have a CEBA Loan of $40,000, you would be eligible for $10,000 loan forgiveness if you pay $30,000 before December 31, 2023. Similarly, for a $60,000 loan, the forgiveness increases to $20,000 if you can pay $40,000 before December 31, 2023.

To summarize, repaying the outstanding balance of the loan (excluding the amount eligible for forgiveness) on or before December 31, 2023, will result in a single tranche of loan forgiveness of up to $20,000 based on a blended rate:

25% on the first $40,000
50% on amounts above $40,000 and up to $60,000

Seeking Financing Options:

If you are unable to repay your loan, it is highly recommended to seek some form of financing in order to pay the portion of your loan that makes you eligible for forgiveness. Allowing the entire balance to go into default should be avoided at all costs, as it would require you to repay the full loan amount without any forgiveness.

Consider Mortgage Refinance as Debt Consolidation:

Similar to any other form of debt, a mortgage refinance has proven to be an excellent tool for debt consolidation. Mortgage refinancing offers lower interest rates compared to unsecured loans, along with more flexible repayment frequencies and amortizations. For instance, a $40,000 unsecured line of credit would require monthly payments ranging from $400 to $600. However, by consolidating the same amount into your mortgage at today’s rates of approximately 5.24%, your payment would be incorporated into your mortgage payment, amounting to around $240 per month. Additionally, you may also consider rolling any other existing debt you have into the mortgage consolidation, potentially reducing your overall monthly debt payment even further. Here is a before/after example of a mortgage refinance involving a CEBA loan and some existing debt:

*Interest rates in the After-scenario are as of July 14, 2023*

Want to explore your mortgage refinance options? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko.

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Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text/WhatsApp | Vancouver (Click Here to schedule a call with Marko!)

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Email: gelo.m@mortgagecentre.com

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InTheNews- Another gut punch from the Bank of Canada

Posted on July 13, 2023July 13, 2023 by markogel@gmail.com

(July 13, 2023)

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Yesterday, the Bank of Canada raised the overnight rate to a 22-year high of 5% which translates to a consumer prime rate of 7.20%. Additionally, they revised their forecast for inflation to hit the 2% target by mid-2025 (6 months later than before), signaling that interest rates will remain higher for an extended period. While this news may come as a disappointment, the economy is still experiencing excess demand, and growth is expected to continue supported by various factors. However, the housing market presents challenges, with rising prices and limited supply.

Impact on Inflation and Housing Market: The unexpected surge in housing resales, coupled with a shortage of supply, has driven house prices higher than initially anticipated by the Bank of Canada in January. As a result, inflation could potentially increase by approximately 0.3% by the end of 2023 compared to an earlier outlook in January. This situation is further compounded by the lack of new housing starts in the current economic conditions, despite a substantial increase in population (addition of 1.2 immigrants).

What should I do?

Given the current circumstances, it’s crucial to approach your next mortgage decision with caution and consider various factors. Here are some tips to navigate the mortgage landscape:
-Explore all available mortgage terms ranging from 1 to 10 years.
-Consider popular terms such as 2-4 year fixed rates.
-Be aware of amortization options to potentially ease the payment shock when transitioning to higher interest rates.

The three tiers of lending

TIER 1-> Toughest qualification guidelines -> 5.15% to 6.49% -> up to 30 years amortization -> 1-10 year terms

TIER 2-> Loosened qualification guidelines -> 5.99% to 7.99% -> up to 35 years amortization -> 1-5 year terms

TIER 3-> minimal qualification criteria -> 10.95% to 14.95% -> interest only payments -> 1 year renewable terms

What happens next?

With the Bank of Canada’s announcement in the rearview mirror, attention now turns to the bond markets, which influence fixed mortgage rates. Following yesterday’s announcement, bond market rates have experienced a slight decrease but only after a steep 30 basis point increase since June 30. It will be interesting to see how the bond markets react going forward. Fixed mortgage rates correlate directly with bond yields, if they increase, so do fixed rates (and vice versa).

Conclusion

The Bank of Canada’s rate hike and revised inflation forecast have implications for borrowers and the housing market. Being proactive in mortgage selection, considering alternative lending options, and staying updated on market trends will empower individuals to make informed decisions. As the situation evolves, it’s essential to remain vigilant and adapt strategies accordingly.

Wondering what to do next? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko.

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Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text/WhatsApp | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Email: gelo.m@mortgagecentre.com

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The Second Home Mortgage

Posted on July 11, 2023July 11, 2023 by markogel@gmail.com

(July 10, 2023)

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This mortgage program allows people to purchase an additional home for immediate family members on a rent-free basis. It is a unique qualification program as it is the only product that allows you to purchase another property in which you do not intend to occupy, with a down payment as little as 5%. Typically, if you do not reside in the property that you purchase, the minimum down payment would be 20%.

Common applications of the Second Home Mortgage Program:

-purchasing a property for the purpose of providing accomodation for an adult child who is starting a business

-providing accomodation for an adult child who is attending a college/university (or any other post secondary educational institute).

-Ideal for elderly parents on fixed incomes who lack qualifying income for mortgage qualification

KEY QUALIFICATION GUIDELINES:

up to 2-unit properties (duplex) are allowed, a family member must occupy one of the units on a rent-free basis
remaining economic life of the property must be at least 25 years
property purchase price must be less than $1M
maximum amortization is 25 years
down payments must be derived from own sources, cannot be gifted, or from borrowed sources
immediate family member is defined as any one of the following: father/mother, child, brother, sister, grandparent, legal guardian, or legal dependant
all qualifying applicants including the resident family member will be required to register on the land title
ability to request additional mortgage funds for immediate renovations/improvements to the property are allowed (via the Purchase PLUS Improvement mortgage guideline)
self employed applicants are allowed provided they can qualify as per their declared incomes via Line 150 of their Notice of Assessments

The following criteria are not permitted under the Second Home Mortgage Program:

vacation properties are ineligible
down payment proceeds cannot come from borrowed sources
down payment proceeds cannot be gifted
must be a Canadian citizen (not available to Temporary residents)
property cannot be rented out to generate income, therefore, projected rental income cannot be used for qualification purposes. Applicant must be strong enough to debt-service the entire mortgage (in addition to any other existing mortgages they may hold)

Wondering if you are eligible to qualify for a Second Home mortgage? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko.

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Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text/WhatsApp | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Email: gelo.m@mortgagecentre.com

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InTheNews- What the Bank Of Canada doesn’t tell you

Posted on June 26, 2023July 11, 2023 by markogel@gmail.com

(June 25, 2023)

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Consumer spending habits are causing central banks worldwide to be concerned. In Canada, many believed that there would be a sustained pause in raising the overnight rate. However, a few weeks ago, the Bank of Canada surprised everyone with a 25-point increase, leading to a rise in the prime rate from 6.70% to 6.95%. Suddenly, we found ourselves in a similar situation to what we experienced in October when fixed rates surged from the 4’s to the 5’s. Moreover, there is speculation that another 25-point increase may be announced on July 12th.

While it may seem like we can only sit and wait until the next announcement, there is more to consider. For instance, the Bank of Canada announcements and their impact on people’s mindsets, both at home and in boardrooms, as well as in the mortgage marketplace across the country. It’s important to note that the interest rates mentioned in these announcements relate to the overnight lending rate, which currently stands at 4.75%. This rate is what banks charge each other when lending money. Banks must maintain a minimum reserve of cash to ensure liquidity in the banking sector. When they fall short of this requirement, they borrow from banks with surpluses. Consequently, when the overnight lending rate changes, banks typically pass on the increase or decrease to their customers through Prime Rate. Currently at 6.95%, Prime Rate is 2.15% higher than the overnight lending rate, representing the banks’ profit margin. This rate adjustment immediately impacts any financial product linked to Prime Rate, including credit cards, personal lines of credit, car loans, and variable rate mortgages.

Indirectly, fixed rate mortgages are also influenced by these changes. However, there is a significant difference in the way fixed rates behave compared to the orderly adjustments of Prime Rate. Fixed rates do not have a formal announcement date or an explanation for rate changes. This lack of transparency often catches people off guard when they inquire about mortgage renewals, purchases, or refinancing. While individuals may believe they are well-informed after hearing the Bank of Canada rate announcement on the radio, fixed rates have fluctuated as much as 50-75 basis points before or after these announcements, without any prior notice or media coverage.

In summary, while the Bank of Canada announcements provide macro-perspective information that offers clues for mortgage decisions, it is crucial to recognize their limitations. Mortgage seekers need to consider a wealth of information regarding fixed rates, term lengths, rate variations, and amortizations. This micro-perspective detail can make a significant difference in their mortgage outcomes. Unfortunately, fixed rate changes are rarely publicized or covered in detail by the media due to their volatility and the multitude of available rates and terms. Keeping track of these changes can be challenging even for mortgage brokers. Therefore, if you’re in the market for a mortgage, whether it’s for a purchase, refinance, or renewal, it’s essential to seek advice from a micro-perspective rather than relying solely on the vague macro-environment portrayed by Bank of Canada announcements. While the Bank of Canada’s information is valuable, it doesn’t fully translate to the complex spectrum of mortgage products available in the marketplace. Conduct thorough research and gather as much information as possible before making any decisions.

Wondering which term is right for you? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko.

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Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text/WhatsApp | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Email: gelo.m@mortgagecentre.com

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The 5% Down Payment Mortgage

Posted on June 23, 2023June 23, 2023 by markogel@gmail.com

(June 23, 2023)

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Securing a mortgage with a minimum down payment of 5% is an attractive option for many potential homeowners. In this blog post, we will delve into the main eligibility criteria for a mortgage program that requires a 5% down payment. Understanding these criteria will help you navigate the application process and determine if you meet the requirements for this type of mortgage.

OCCUPANCY REQUIREMENT:

To qualify for this mortgage program, you must plan to occupy at least one unit of the property. Whether you reside in the property or one of the units within the property (i.e. duplex), your intention to occupy the space is a key criterion for eligibility.

DOWN PAYMENT VARIATION:

For single-family dwellings and duplexes, the minimum down payment requirement is 5%. However, if you are purchasing a triplex or fourplex, the minimum down payment increases to 10%. It’s important to note this distinction when considering the type of property you intend to purchase.

PURCHASE PRICE LIMIT:

The property’s purchase price must be below $1 million to qualify for this mortgage program. For purchases up to $500,000, the minimum down payment remains at 5%. Beyond $500,000, the minimum down payment increases to 10% for the remaining balance up to just under $1 million.

MORTGAGE TYPES:

This mortgage program allows for a variety of mortgage types, including fixed-rate, standard variable, capped variable, and adjustable-rate mortgages. You have the flexibility to choose the mortgage type that best suits your financial goals and preferences. A broad spectrum of terms are also available, ranging from 6 month to 10 year terms.

AMORTIZATION PERIOD:

The maximum (and default) amortization period for this mortgage program is 25 years. Amortization periods greater than 25 years are available, but only for conventional mortgages (mortgages with down payments that exceed 20%)

QUALIFYING INTEREST RATE:

The qualifying interest rate for this mortgage program is calculated as the greater of the contract rate plus 2% or 5.25%. This ensures that borrowers can handle potential interest rate increases and manage their mortgage payments effectively. (this is the qualifying rate policy as of the date of this blog post, inquire with Marko Gelo directly for the most up-to-date qualifying rate/policy)

MORTGAGE DEFAULT INSURANCE PREMIUM:

As this mortgage program is for purchases with less than 20% down payment, mortgage default insurance is necessary. The insurance premium is a one-time cost that gets added to your mortgage balance. The premium amount decreases as the down payment increases. Click Here to be redirected to one of Canada’s mortgage default insurance providers to view the various premium charges.

INCOME AND EMPLOYMENT VERIFICATION:

Standard income and employment verification requirements apply for this mortgage program. Lenders will assess your income stability and employment history to ensure your ability to meet mortgage obligations.

MINIMUM CREDIT SCORE:

To be eligible for this mortgage program, a minimum credit score of 600 is required. A higher credit score can improve your chances of approval and may result in more favorable loan terms.

ACCEPTABLE SOURCES OF DOWN PAYMENT:

Various sources of down payment are permitted, including personal savings, RRSP withdrawal, non-repayable gifts from relatives or individuals with a legal relationship, sweat equity, existing home equity, proceeds from property sales, and certain Government grants. These options provide flexibility in securing the required down payment.

ADDITIONAL ELIGIBLE MORTGAGE PROGRAMS:

In addition to the 5% down payment program, several other mortgage programs offer similar down payment requirements. These include the Purchase Plus Improvements Program, Family Plan Program, New to Canada Program, and Vacation/Secondary Homes Program. Contact Marko Gelo to discuss the program that best fits your needs.

Wondering if you are eligible to qualify for a mortgage with a minimum down payment of 5%? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko.

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Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text/WhatsApp | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Email: gelo.m@mortgagecentre.com

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Goodbye Vancouver, hello Calgary!

Posted on May 29, 2023 by markogel@gmail.com

(May 29, 2023)

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In 2022, 28,232 British Columbians(BC) packed their belongings and made their way to (mostly) Calgary or Edmonton, a significant increase from the previous year when only 13,790 BC residents made the trek. This trend is expected to continue as the housing affordability crisis worsens in Greater Vancouver, where the current benchmark price for a single-family detached home is $1.9 million.

If you currently own property in Vancouver, the concept of selling high and buying low comes to mind when considering Alberta’s real estate market. In many instances, you can sell your current property in Vancouver and purchase a larger (and likely better) one in Calgary for significantly less. This can lead to a drastic reduction in your mortgage size or even the possibility of avoiding one altogether. For many, it can be a real and life-altering opportunity.

Here are some key points to be aware of if you’re considering a move from Vancouver to Calgary:

The price of real estate is significantly lower!

As of April 2023, the benchmark price of a single-family detached home in Greater Vancouver was $1,915,800. Meanwhile, in Calgary, the average price for the same property type is more than two times lower at $729,870, and even lower in Edmonton at $500,635 (almost four times lower!). Not only is the real estate cheaper, but it’s also likely newer – like decades newer!

There is no Property Transfer Tax in Alberta!

In BC, when you purchase a property, you have to pay a Property Transfer Tax (PTT) which is calculated based on the property’s value. This tax cannot be included in your mortgage proceeds and must be paid separately. In Vancouver, purchasing a benchmark-priced single-family home for $1,915,800 would also require an additional $36,316 for Property Transfer Tax. In Alberta, the equivalent fee is a registration fee of only $1,328.50.

The minimum down payment in Calgary is much more achievable compared to Vancouver!

In Canada, for purchases of $1 million or greater, the minimum down payment required to qualify for a mortgage is 20%. In Vancouver, where almost every single detached home is priced above $1.3 million, the minimum required down payment would be $260,000. In Calgary, down payments are much more manageable. For properties below $1 million, the minimum required down payment is 5% on the first $500,000 and 10% on the balance up to just under $1 million. So for an average-priced single-family detached home in Calgary, where the average price is $730,000, your minimum required down payment would be $48,000. In contrast, the average benchmark price of a single-family detached home in Greater Vancouver is $1,915,800, and the minimum down payment required would be $383,160.

There is no Foreign Buyer Tax in Alberta!

If you are new to Canada and have a valid work permit, you can purchase a property in Alberta without incurring the foreign buyer tax. In Ontario and BC, in addition to provincial Land Transfer Taxes, you must also pay the foreign buyer tax. So, for example, if you purchase an average-priced single-family home for $1.9 million, you would need a minimum down payment of $380,000 (20% of the purchase price) if you require a mortgage. Add to that the provincial Property Transfer Tax of $36,000 and an additional $380,000 for the foreign buyer tax (also 20% of the purchase price in BC…it’s 25% in Ontario!). Altogether, you would need $760,000 upfront to purchase a $1.9 million single-family home (which possibly requires some work). In comparison, a similarly sized home in one of Alberta’s major cities, Calgary or Edmonton, would start at around $600,000 (and very likely be larger and newer).

Your mortgage qualification goes a long way in Alberta!

There is a significant difference in the income required to qualify for a mortgage when purchasing a property in Calgary compared to Vancouver. Calgary’s lower housing prices relative to Vancouver mean that the income threshold needed to qualify for a mortgage is comparatively lower. With a more affordable real estate market, aspiring homeowners in Calgary can secure mortgage approvals with a relatively lower income level. On the other hand, Vancouver’s exorbitant housing prices necessitate a substantially higher income to meet the stringent mortgage qualification criteria. The soaring real estate market in Vancouver has resulted in a significant disparity in the income required for homebuyers, making it considerably more challenging for individuals with moderate incomes to enter the property market. To purchase an average-priced single-family detached home in Calgary, where the average price is around $730,000, a gross annual income of $160,000 and a minimum down payment of $48,000 would be required. If you increase the down payment to 20%, the required annual income to qualify for a mortgage would decrease substantially to $110,000. In contrast, the same scenario in Vancouver, where the average price for a single-family detached home is $1.9 million, would require an annual income of about $300,000 and a minimum down payment of at least $383,000.

(Qualification Disclaimer Detail: at the time this article was published, the posted 5-year fixed rate was 5.19%, therefore all the scenarios above were calculated based on a stress test of 7.19%. Inquire directly with Marko Gelo to calculate your qualification details based on today’s market rates. Be aware that interest rates fluctuate daily and have a direct impact on your mortgage qualification amount.)

Comparing Vancouver to Calgary (or any other city in Canada, for that matter) is not a fair comparison, but when it comes to real estate affordability…

There are very few places on planet Earth that compare to Vancouver, and Calgary by no means is Vancouver’s sister city. But it’s no pushover either. What other city can boast that they host the greatest outdoor show on earth?! If you haven’t already heard, Calgary becomes Canada’s party zone during the first half of July every year as it kicks it up a notch to host the Calgary Stampede. For the entire 9-day event, you can attend corporate-sponsored breakfasts, lunches, and hundreds of private functions daily. In Calgary, there’s Christmas break, spring break, summer break… and Stampede break.

Other noteworthy points about Calgary:

Declared the youngest workforce in Canada, with a naturally vibrant and energetic population.
The most sun-filled days of any city in Canada.
No oceanic views, but plenty of world-class riverways in both urban and rural settings.
Prairie-esque landscape to the east and rugged mountain terrain to the west.
Surrounded by world-class outdoor terrain for golf, hiking, mountain biking/climbing, fishing, hunting, lake ice-skating, skiing, Nordic activities, snowmobiling, outdoor hockey rinks, etc.
Calgary to Kananaskis Country-Canmore-Banff is just a 60-90 minute drive west.
An increasingly diverse economy with the largest head office representation in Canada.

Moving from Vancouver to Calgary is undoubtedly a monumental undertaking, as it involves relocating from one province to another. Such a move may not be feasible for many individuals due to various factors, such as personal circumstances, financial constraints, or strong ties to their current location. However, for those who are open to the idea and can navigate the challenges, it could potentially be one of the best decisions they ever make. Calgary offers distinct advantages, including a more affordable cost of living, a strong job market, and a vibrant community. The opportunity to experience a different lifestyle, embrace new opportunities, and potentially enhance one’s career prospects makes the prospect of moving from Vancouver to Calgary enticing for some individuals.

Remember, the decision to relocate is significant, and it’s crucial to consider all aspects, including personal and professional factors, before making a final decision.

Wondering if a move to Calgary is possible for you? Considering relocating to Calgary? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko.

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Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text/WhatsApp | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Email: gelo.m@mortgagecentre.com

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If I put more money down, will I get a better interest rate?

Posted on May 22, 2023May 22, 2023 by markogel@gmail.com

(May 22, 2023)

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Many people think that the more money you put down, the better your interest rate will be – this is not entirely true. With the inclusion of mortgage default insurance, oftentimes the very best interest rates are granted to applicants who have down payments as small as 5%! You would think applicants with larger down payments would be rewarded with the best interest rates, but that is not the case. And here’s why -> mortgages with down payments less than 20% are subject to an insurance premium that gets tacked on to their mortgage principal. The insurance premium essentially makes the mortgage a risk-free investment (to the lender) – if the borrower defaults on the mortgage, the lender makes the claim and is refunded the outstanding mortgage principal. But here’s the kicker. The borrower pays for the insurance, not out of pocket, but through a direct equity hit when the premium is tacked on to the mortgage. When you factor in the immediate loss in equity, the lower interest rate loses its appeal. Insurance premiums are mandatory for all mortgages in Canada with down payments less than 20%. Here’s a comparison that shows the difference between a buyer with 5% down versus a buyer with 20% down, both with an identical mortgage principal balance of $475,000 (as of May 21, 2023 market rates):

Also worth noting is that mortgage default insurance premiums are tiered; as you increase your down payment, the premium decreases until you finally reach the 20% down payment threshold where insurance requirements cease. Click Here to be redirected to the insurance premium table of Canada Guaranty (one of Canada’s three mortgage default insurance providers).

Just as insurance premiums are tiered, so too are lenders’ interest rates. In the comparison table above, the interest rate for a mortgage with a 20% down payment is 5.04%, but many lenders offer deeper discounts with larger down payments. Unlike the assurance of mortgage default insurance, uninsured-mortgage lenders achieve a similar level of assurance when they reach a loan-to-value ratio of 65%. So, at 80% loan-to-value (20% down payment), the rate offered in the table above is 5.04%, but as the down payment increases, the lender decreases the interest rate further until they finally reach the 65% loan-to-value ratio at which point they match the insured-mortgage rate of 4.79%. It is at the 65% loan-to-value threshold that lenders feel they are virtually guaranteed a return of their principal in the event the borrower defaults. Essentially, if required, they feel that even in a weak market and/or economy they could sell the property at a substantial market discount and possibly even come out on top with a surplus profit.

Wondering how you can get the best possible mortgage rate? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko.

Don’t want to miss out on the next blog post? Click Here to have future issues emailed directly to your inbox!

Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text/WhatsApp | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Email: gelo.m@mortgagecentre.com

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Verifying your mortgage down payment…not as simple as you think

Posted on May 20, 2023May 22, 2023 by markogel@gmail.com

(May 20, 2023)

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The most overlooked part of mortgage qualification -> DOWN PAYMENT VERIFICATION. It’s tedious, frustrating, annoying, insulting, mind-boggling, bizarre…ok, I think you get the message. Personally speaking, I find that the down payment verification is an all-or-nothing type of experience with many of my clients. It’s like purchasing something from IKEA. If you follow the assembly instructions you end up with the desired outcome, but if you take the common-sense-installation approach all bets are off the table…in many cases, the assembly turns into surgery. Even if you’re a carpenter or master assembler in a world-leading manufacturing plant, IKEA assemblies can get ya. That little bedside stand you just purchased will knock you on your a$$ and turn your evening upside down if you take the common-sense-installation approach. Just follow the instructions. FOLLOW THE INSTRUCTIONS.

This post is intended to set the expectation for down payment verification. Just accept it. When qualifying for a mortgage (especially these days), lenders will turn into CIA interrogation-type of characters. Everything about your down payment proceeds must be known; mainly its origin, and 120-day history. And equally important, the documentation that you provide must be up to the lender’s standard. In a nutshell, they need to be convinced that your money was not sourced from a bustling drug cartel, terrorist group, organized crime unit, or illegal tax-avoiding lemonade stand operation. The common-sense approach does not exist in this area of mortgage qualification. The lenders will ignore your explanations, pleas, complaints, human rights claims, etc. If you don’t provide what they require, they will continue to hold your mortgage hostage. Give them what they want, and move on.

a Down Payment Verification-Interrogation Unit in action

Down Payment Verification INSTRUCTIONS:

Provide documentation to the lender that verifies the following:

120-day history of your down payment proceeds (ask your mortgage broker the start and end dates that are required for the 120-day period as the date sets vary with lenders).
other than your personal income deposits, if there are any additional deposits that exceed $5,000 within the 120-day verification you initially provided, you must also provide a 120-day history of said deposit (this is known as down payment verification mutation – applicants typically show the first sign of distress/anger/frustration at this stage).
the documentation that you provide MUST display/confirm your ownership. Your name and/or account number must be displayed on the documents. Cross-reference documents are acceptable. For example, if your bank statement displays your account number but not your name, then additionally provide either an older and more complete version of the bank statement or a void cheque.

DON’T DO THE FOLLOWING:

avoid using your cell phone online banking portal for down payment verification documents as they typically do not display the account number and your name in their entirety. Abbreviations to your name and account number are not acceptable.
do not scratch out or modify any information on the documents that you provide, if you do, the lender will deem the document null and void
provide documents in their entirety, even if the final page contains miscellaneous information. For example, if you provide documents that display ‘page 1 of 7’ and you only provide 4 pages, the lender will request the remaining 3 pages.

Need help cracking the down payment verification code? To learn more about Down Payment verification and how it applies to you, call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko.

Don’t want to miss out on the next blog post? Click Here to have future issues emailed directly to your inbox!

Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text/WhatsApp | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Email: gelo.m@mortgagecentre.com

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