There are a lot of reasons why I love my job. I love people, I love helping people & I love being a part of what is such an exciting & special time in my clients’ lives. I also love building a business & the income opportunities that lay on the horizon. Would I still do this job if I won the lottery? Without a doubt (buuut I might turn my phone off at 5).
When I first started in the business, I was as green as they get, so it was important for me to find a good group who could teach me to build my business the right way. Commission split (the percentage of your finders fee that is paid to your brokerage) was of course something I asked about, but in all honesty it didn’t play a significant role in my decision of where to hang my license & the longer I’ve been in the business, the more firmly I believe that a focus on split is short sighted.
One of the best parts of our office is the support. We have some top shooters who do a ton of volume & brokers who specialize in just about every niche you could imagine. This is a huge resource. I can’t tell you how many times I’ve saved a deal or found a solution way out of left field for a client thanks to insight or a contact from one of my colleagues. The knowledge mine at our office has resulted in a far higher volume & income for me then earning a few extra percentage points on my split.
How many offices have a list of top brokers who will answer their phones at 10:30 on a weeknight or while vacationing abroad to help another broker work through a deal? This is huge for me. Ultimately, it gives me more tools to help my clients & my realtors & pays dividends down the road. Even years later, now that I’m established, there are still files every now & then that may be outside my normal realm of expertise. No one can specialize in all segments of the market (except maybe Rowan Smith… that hamster’s got legs). If a colleague helps me save 2 or 3 deals a year, it’s made up for a 5% difference in split.
For any new broker, the best advice I can give is to find a supportive office & don’t worry about your split. If you come into this business with money as your sole focus, chances are you are not going to be advising clients in terms of what is best for them. The income will come but you have to be in the right environment to learn & grow.
Saving deals, or learning how to be a top broker, is something that can be hard to quantify, while commission split is obviously an easy point of comparison. Just as clients looking for the rock-bottom lowest possible rate are probably setting themselves up for a big (and expensive) disappointment down the road, the same is true in this business with new brokers. The old saying of, “you get what you pay for,” is certainly true in this industry. Like most services, the cheapest (or the highest split) isn’t usually the best thing for you.
If you are a broker who is just breaking into the business, or one who has been at it a few years but wants to hit that next level, I would highly recommend keeping these points in mind & come talk to City Wide.
https://ZupanMortgage.com/wp-content/uploads/2020/05/Citywide-logo.png00adminhttps://ZupanMortgage.com/wp-content/uploads/2020/05/Citywide-logo.pngadmin2015-07-24 09:31:222015-07-24 09:32:49Why Commission Split Isn’t Everything & Why I Work For City Wide
There are a lot of moving parts when you buy a home. Before you start looking with your realtor, you have to get a price range & pre-approval sorted out with your mortgage broker. Then once that’s all sorted & you’ve found a home, your money needs to be freed up & ready for the deposit, so you might need to speak with your financial adviser or tax adviser, or your family members if any of that down payment money is coming as a gift. Then, before closing you need to sort out your life insurance & your home insurance, and in the midst of getting ready for & coordinating that big move, you have to go in to see your lawyer/notary to sign a small tree’s worth of documents at some point before closing.
The last thing you need on your plate is any hiccups in the mortgage process. Here are the 5 most common mistakes that delay the mortgage process:
Not sharing changes to the offer price with your lender
If issues come up in the home inspection that the seller drops the purchase price to account for, you need to let your lender know right away. Depending on what the issue is, the lender may need to have it rectified prior to you taking possession. If the bank doesn’t find out about this until they get a copy of the purchase contract from your lawyer a few days before possession, you could put yourself in a real pinch with only a short time until closing.
Confusing approval with pre-approval
Nowadays, a pre-approval really just gives you a rate hold & a price range. Lenders don’t fully underwrite pre-approval submissions so it’s vital that you get an approval in writing prior to you removing your financing condition & committing to buy the property. Banks need to look at the whole picture, which includes your financial details AND the property details.
Not disclosing where your down payment money is coming from
If a portion of your down payment is coming from a family member, or from a line of credit, let your mortgage broker know early on. It’s not uncommon for a client to say down payment is coming from their resources & then we find out that isn’t the case once we start collecting down payment documentation. Lenders want to know about this up front otherwise they will have to go back & get the file re-approved. In some cases, this could even put your approval in jeopardy.
Not sharing details of your income or employment
If you recently changed your compensation plan (from salary to commission, or vice versa) or plan to change your employment, tell us right away. Lenders have the right to call your employer at any time before closing to verify your employment details & if something like that comes up late in the game, again, it can jeopardize your approval.
Not providing all the required documentation
When you get a mortgage, the lender will need to see confirmation of certain details in your application (income, down payment, debts, etc). When I pre-approve my clients, they get a list of what documents will be required for mortgage approval. To make the transaction as smooth as possible, send those in right away. If the lender can get all of those documents up front, you can take a lot of stress & scrambling out of the picture.
Buying a come can be stressful enough. The last thing you need is fuel to that fire so make sure you are upfront with your team of professionals & on the ball in terms of getting them what they need early on.
If you would like to know more about how to ensure a smooth home buying process, contact me at ryan@citywidemortgage.ca.
https://ZupanMortgage.com/wp-content/uploads/2020/05/Citywide-logo.png00adminhttps://ZupanMortgage.com/wp-content/uploads/2020/05/Citywide-logo.pngadmin2015-07-15 08:19:072015-07-15 08:19:29Top 5 Mistakes That Delay the Mortgage Process
Without question, mortgage penalties can end up being the most costly element of a mortgage. Penalty calculations vary between lenders & is exactly why you need to shop around & do your due diligence (or speak to me!).
Fixed rate penalties are the greater of:
— 3 months’ interest [(mortgage balance * interest rate / 12) * 3], or
— the Interest Rate Differential (IRD): this calculation compares your interest rate to the current rate for the remaining term of your mortgage. ex: 4 years into a 5 year term, that rate would be based on the lender’s 1 year fixed rate.
**there are certain “no frills” or “low rate” products which are the greater of those 2 calculations OR 2.75% – 3% of the mortgage balance.
For this comparison, we’re going to look at a few examples of penalties under the following criteria:
-$400k mortgage at 2.69% 5 year fixed, 25 year amortization
-2.05% discount received off the bank’s posted rate of 4.74%
-a current 2 year posted rate of 4% when the mortgage is broken
-breaking the mortgage in year 3 with $364,871 remaining
Big Bank (Scotia, TD, BMO, RBC, CIBC):
$5,400
-The banks’ calculations factor in the discount you received off the posted rate when the mortgage was setup. In this case, that discount is 2.05%, so the comparison rate is going to be 1.95% (4%-1.05%)
Mononline Lender (First National, Street Capital, MCAP, etc):
$2,690
-monolines do not have posted rates. Comparing your rate to their current discounted rate makes a big difference on penalty.
“No Frills”or “Low Rate” product:
$10,946
-These highly restrictive, low rate, products are currently offered by a number of monolines (Canadiana, RMG, DLC) & have different names depending on the lender. The rate is lower than their standard fixed rates, however the penalty is the greater of 3 months’ interest, IRD OR 2.75% – 3% of the balance. You can bank on the penalty being the later of those 3 calculations.
Mortgage penalties vary, a lot. This is easily the most overlooked feature of a mortgage & can easily end up being something people regret not looking into further. On avg, in Canada, most borrowers break their 5 year mortgage before the 4th year. A lot can happen, especially if this is your first purchase.
When you weigh your options, you need to compare the savings on rate to the potential difference in penalty. On that above example, the difference between 2.74% & 2.69% is $10 / month, which is generally less than what most people would assume. Is it worth saving $10 / month for the next 5 years but risking a penalty that could be $7k greater?
Ask the right questions. You’ll be glad you did!
https://ZupanMortgage.com/wp-content/uploads/2020/05/Citywide-logo.png00adminhttps://ZupanMortgage.com/wp-content/uploads/2020/05/Citywide-logo.pngadmin2015-06-04 11:29:232015-06-04 11:34:09Mortgage Penalties: How the same rate can cost you $7k more
*Foreword: by no means am I against affordable housing options. I think it would be fantastic to find a way for families to live close to dt. The point of this is that there are other options to raise a family than buying a detached home & that tradeoffs have to be made.
I fundamentally do not understand what this #donthave1million campaign is trying to achieve. I’m proudly biased when I say this, but Vancouver is the best city in the world. That’s why I moved here. That’s why millions of people are moving here. It’s what happens in great cities & is going to happen more & more unless humans stop reproducing. With that in mind, what exactly is the solution the #donthave1million rant is all about? If everyone deserves to own a detached single family home within the city limits, where are they supposed to go?
This argument of being entitled to own a house with a yard within a bike ride of downtown is naive. It neglects the basic laws of supply & demand, & confuses needs with wants. The price of real estate has risen in Vancouver because it’s a great city & people want to live here, just as they have for generations before, albeit at a rate not quite as rapid as today. Do you know who deserves to live in that lovely west side house, minutes walk from the beach & drive from downtown? Those who can afford to do so, those that have worked hard, saved & have enough money to pay for it. That’s life. That’s the world we live in. If that’s a hard reality to consider, then readjust your priorities & accept that, like all things in life, it’s a question of trade offs.
Want to buy a house for under $600k? Great! You have a ton of options in Metro Vancouver. Don’t want a 30+ minute commute to work? Great! Buy a condo or town home. What’s that? You don’t want to live in a condo or town home? Ok then, rent a house. Oh, I’m sorry, you want to buy a place? Ok then, figure out what’s most important to you & make a decision.
The reality is you don’t need a cool million to own a home with a Vancouver address. You need about $20k. If you feel that owning a house with a yard is your right, then stomach a longer commute to work, or join the millions of families around the world who live in condos. Trade offs – if this is your first time encountering them, then you’ve lived a very privileged life, my friend.
Let me ask you this: when you start arguing that you deserve a house with a yard in the city, where does it end? When is it enough? At what point is the line drawn where it becomes too much? Do you need a house? Do you need 2000 sq ft? Do you need a yard big enough for kids to play hide & seek in, just as you did when growing up? This is a confusion of needs & wants. It’s an argument that exposes a spoiled generation where we all get medals just for showing up.
You don’t need a million to live in Vancouver. You need to quit thinking you deserve something that millions of others would love to have.
https://ZupanMortgage.com/wp-content/uploads/2020/05/Citywide-logo.png00adminhttps://ZupanMortgage.com/wp-content/uploads/2020/05/Citywide-logo.pngadmin2015-06-03 11:29:022015-06-04 08:46:15The Age of Entitlement: “Let Them Eat Cake!” —-> “Let Them Have Houses!”
I’ve wanted to do a video on this for some time, as I keep running into clients who are coming up to the end of their mortgage term, can save money by changing banks only to realize that they can’t actually leave without it costing them money. So we’re going to talk about 2 types of mortgage registration –standard charge & collateral charge mortgages. With some banks moving exclusively to collateral charge mortgages, it’s important to understand the differences.
Standard charge mortgages are what most people are familiar with. With this, the amount of your mortgage is registered on title – no more, no less. If you’re buying a $500k place with $100k down, then only that $400k will be registered.
Now, with a standard registration, once you reach the end of your term, it’s almost like you are a free agent again. You’ll get a renewal offer from your bank & if you find a better offer elsewhere, you can move banks without having to worry about paying legal fees all over again. If you can save money leaving, leave! Easy peasy.
Now the reality here is that an awful lot of people don’t bother to shop around at renewal & they just sign the offer they get in the mail & begin a new term. Well lenders know this & count on this & this is why renewal offers are usually not very good. This is why you should always give me a call when you are 4 months from renewal to see what’s out there.
I bring up renewal b/c the differences between standard & collateral charge mortgages are most evident here. With a collateral charge mortgage, you can’t actually leave your bank unless you pay legal fees all over again. In that sense, the lender has their hooks in you a little deeper. They know it’s going to be more difficult for you to move & because of that they may not be as sharp on their renewal offer. So for borrowers who want to keep their options open at maturity & have some negotiating power with their lender, this may not be the best option.
Further to this, with a collateral charge, all of your secured debt (credit cards, lines of credit) that you have with your bank that is interconnected with your mortgage may have grave implications. If you default on one, the banks can go after your property to pay off those accounts. They can even increase your interest rate by up to 10%. You could potentially lose your house.
So who is a collateral charge mortgage good for? The advantage of this is the bank can advance you more money after closing without involving a lawyer. Provided you aren’t exceed the amount initially registered for, if you wanted to set up or increase your line of credit, take out some equity for renovations or investments, you can do all this & save from having to pay the costs of reregistering.
The problem, is most of the banks that register in this fashion don’t give you the choice.
Know what your options are, know the pros & cons of each & make sure you’re committing to the right product.
I’m Ryan with City Wide Mortgage services, contact me to learn more of the different types of mortgages out there.
Ryan Zupan
ryan@citywidemortgage.ca
604.250.6122
https://ZupanMortgage.com/wp-content/uploads/2020/05/Citywide-logo.png00adminhttps://ZupanMortgage.com/wp-content/uploads/2020/05/Citywide-logo.pngadmin2015-06-03 11:27:222015-06-03 11:27:22How To Shop For A Mortgage (Part 4 – Mortgage Registration)
Hi Ryan Zupan here with the City Wide Mortgage services. This video is part of our series on what to look for when shopping for a mortgage & today we are going to cover mortgage penalties.
Mortgage penalties, without question, can have the largest impact on how much your mortgage is going to cost you. They can range from very the manageable to the borderline devastating. Some of you have probably heard horror stories or news reports of clients getting hit with penalties of $20k-$30k. I can tell you, these stories are very much true & exactly why you need to know what kind of mortgage you are signing up for.
For this video, we are going to talk primarily about penalties on fixed rate mortgages & the reason for that is with most variable rate mortgages out there, the penalty for breaking is going to be 3 months of interest, so whatever interest you pay per month, multiply that by 3. On the penalty side of things, this is what you want. It’s a lower penalty that what you’ll find with different types of mortgages out there.
Now there are exceptions to that. Right now there are a few variable products out there that have a very low rate, which is great, but they have EXTREMELY high penalties. I’m talking a flat penalty of 3% of the mortgage balance. So on a $400k mortgage, that’s a penalty of $12k, which is huge. Especially when you compare that to what you are saving going with that lower rate option.
On that $400k mortgage, the difference of 0.05% on interest rate, so let’s say 2.3% compared to 2.35%, is around $10 / month, which isn’t really that much. Is it worth risking a penalty that has the potential to be $9k or $10k higher than other options to save a mere $10 / month ? Probably not, so, again, it is vital that you know what you are signing up for.
Now with fixed rate mortgages, the penalty is a bit more complicated. It’s the GREATER of 3 months interest (same penalty as the variable) OR a calculation called the interest rate differential (IRD). The IRD is a formula the lender uses which factors in how much money they will be earning when they relend your money out for the remainder of your term.
For example, if you’re 3 years into your 5 year term, the lender wants to know how much they will earn relending your money out on a 2 year term. If the 2 year rate is higher than your interest rate, then the lender will be better off — the lender is going to make more money. If your rate is 3% & the 2 year rate is 4%, the bank is going to be better off, so your penalty will just be 3 months interest. On the flipside, if rates are lower – if your rate is 3% but the 2 year rate is just 2.5% — then the bank is going to lose money once you break the mortgage. It’s these situations where the penalties can be quite high.
Now, the kicker to all this is that the IRD calculation differs from bank to bank. Some lenders will do a straight rate comparison – if your interest rate is 3% & the 2 year rate is 4%, they compare one rate to the other.
BUT, for some institutions, it is not that simple… some factor in discounts they gave you off of their posted rate, some base the comparison rate on the corresponding bond yield. There are a lot of differences that can really impact what your penalty could end up being.
By no means am I trying to dissuade you from taking a fixed rate. There are certainly advantages of going fixed & for many borrowers that’s definitely the right fit, but I do want you to be asking these questions going in. A mortgage is more than interest rate. Don’t just go for the lowest rate. Know what you are signing up for. Make sure it’s the right fit. You will thank yourself down the road.
I’m Ryan with City Wide Mortgage Services. Please contact me & I’d be happy to go over this in more detail with you.
Ryan Zupan
Mortgage Planner
ryan@citywidemortgages.ca
604.250.6122
https://ZupanMortgage.com/wp-content/uploads/2020/05/Citywide-logo.png00adminhttps://ZupanMortgage.com/wp-content/uploads/2020/05/Citywide-logo.pngadmin2015-06-03 11:25:392015-06-03 11:25:39How To Shop For A Mortgage (Part 3 – Mortgage Penalties)
Why Commission Split Isn’t Everything & Why I Work For City Wide
/in Misc., Personal /by adminChampion
There are a lot of reasons why I love my job. I love people, I love helping people & I love being a part of what is such an exciting & special time in my clients’ lives. I also love building a business & the income opportunities that lay on the horizon. Would I still do this job if I won the lottery? Without a doubt (buuut I might turn my phone off at 5).
When I first started in the business, I was as green as they get, so it was important for me to find a good group who could teach me to build my business the right way. Commission split (the percentage of your finders fee that is paid to your brokerage) was of course something I asked about, but in all honesty it didn’t play a significant role in my decision of where to hang my license & the longer I’ve been in the business, the more firmly I believe that a focus on split is short sighted.
One of the best parts of our office is the support. We have some top shooters who do a ton of volume & brokers who specialize in just about every niche you could imagine. This is a huge resource. I can’t tell you how many times I’ve saved a deal or found a solution way out of left field for a client thanks to insight or a contact from one of my colleagues. The knowledge mine at our office has resulted in a far higher volume & income for me then earning a few extra percentage points on my split.
How many offices have a list of top brokers who will answer their phones at 10:30 on a weeknight or while vacationing abroad to help another broker work through a deal? This is huge for me. Ultimately, it gives me more tools to help my clients & my realtors & pays dividends down the road. Even years later, now that I’m established, there are still files every now & then that may be outside my normal realm of expertise. No one can specialize in all segments of the market (except maybe Rowan Smith… that hamster’s got legs). If a colleague helps me save 2 or 3 deals a year, it’s made up for a 5% difference in split.
For any new broker, the best advice I can give is to find a supportive office & don’t worry about your split. If you come into this business with money as your sole focus, chances are you are not going to be advising clients in terms of what is best for them. The income will come but you have to be in the right environment to learn & grow.
Saving deals, or learning how to be a top broker, is something that can be hard to quantify, while commission split is obviously an easy point of comparison. Just as clients looking for the rock-bottom lowest possible rate are probably setting themselves up for a big (and expensive) disappointment down the road, the same is true in this business with new brokers. The old saying of, “you get what you pay for,” is certainly true in this industry. Like most services, the cheapest (or the highest split) isn’t usually the best thing for you.
If you are a broker who is just breaking into the business, or one who has been at it a few years but wants to hit that next level, I would highly recommend keeping these points in mind & come talk to City Wide.
Top 5 Mistakes That Delay the Mortgage Process
/in mortgage advice /by adminThere are a lot of moving parts when you buy a home. Before you start looking with your realtor, you have to get a price range & pre-approval sorted out with your mortgage broker. Then once that’s all sorted & you’ve found a home, your money needs to be freed up & ready for the deposit, so you might need to speak with your financial adviser or tax adviser, or your family members if any of that down payment money is coming as a gift. Then, before closing you need to sort out your life insurance & your home insurance, and in the midst of getting ready for & coordinating that big move, you have to go in to see your lawyer/notary to sign a small tree’s worth of documents at some point before closing.
The last thing you need on your plate is any hiccups in the mortgage process. Here are the 5 most common mistakes that delay the mortgage process:
If issues come up in the home inspection that the seller drops the purchase price to account for, you need to let your lender know right away. Depending on what the issue is, the lender may need to have it rectified prior to you taking possession. If the bank doesn’t find out about this until they get a copy of the purchase contract from your lawyer a few days before possession, you could put yourself in a real pinch with only a short time until closing.
Nowadays, a pre-approval really just gives you a rate hold & a price range. Lenders don’t fully underwrite pre-approval submissions so it’s vital that you get an approval in writing prior to you removing your financing condition & committing to buy the property. Banks need to look at the whole picture, which includes your financial details AND the property details.
If a portion of your down payment is coming from a family member, or from a line of credit, let your mortgage broker know early on. It’s not uncommon for a client to say down payment is coming from their resources & then we find out that isn’t the case once we start collecting down payment documentation. Lenders want to know about this up front otherwise they will have to go back & get the file re-approved. In some cases, this could even put your approval in jeopardy.
If you recently changed your compensation plan (from salary to commission, or vice versa) or plan to change your employment, tell us right away. Lenders have the right to call your employer at any time before closing to verify your employment details & if something like that comes up late in the game, again, it can jeopardize your approval.
When you get a mortgage, the lender will need to see confirmation of certain details in your application (income, down payment, debts, etc). When I pre-approve my clients, they get a list of what documents will be required for mortgage approval. To make the transaction as smooth as possible, send those in right away. If the lender can get all of those documents up front, you can take a lot of stress & scrambling out of the picture.
Buying a come can be stressful enough. The last thing you need is fuel to that fire so make sure you are upfront with your team of professionals & on the ball in terms of getting them what they need early on.
If you would like to know more about how to ensure a smooth home buying process, contact me at ryan@citywidemortgage.ca.
Mortgage Penalties: How the same rate can cost you $7k more
/in Penalties /by adminWithout question, mortgage penalties can end up being the most costly element of a mortgage. Penalty calculations vary between lenders & is exactly why you need to shop around & do your due diligence (or speak to me!).
Fixed rate penalties are the greater of:
— 3 months’ interest [(mortgage balance * interest rate / 12) * 3], or
— the Interest Rate Differential (IRD): this calculation compares your interest rate to the current rate for the remaining term of your mortgage. ex: 4 years into a 5 year term, that rate would be based on the lender’s 1 year fixed rate.
**there are certain “no frills” or “low rate” products which are the greater of those 2 calculations OR 2.75% – 3% of the mortgage balance.
For this comparison, we’re going to look at a few examples of penalties under the following criteria:
-$400k mortgage at 2.69% 5 year fixed, 25 year amortization
-2.05% discount received off the bank’s posted rate of 4.74%
-a current 2 year posted rate of 4% when the mortgage is broken
-breaking the mortgage in year 3 with $364,871 remaining
Big Bank (Scotia, TD, BMO, RBC, CIBC):
$5,400
-The banks’ calculations factor in the discount you received off the posted rate when the mortgage was setup. In this case, that discount is 2.05%, so the comparison rate is going to be 1.95% (4%-1.05%)
Mononline Lender (First National, Street Capital, MCAP, etc):
$2,690
-monolines do not have posted rates. Comparing your rate to their current discounted rate makes a big difference on penalty.
“No Frills”or “Low Rate” product:
$10,946
-These highly restrictive, low rate, products are currently offered by a number of monolines (Canadiana, RMG, DLC) & have different names depending on the lender. The rate is lower than their standard fixed rates, however the penalty is the greater of 3 months’ interest, IRD OR 2.75% – 3% of the balance. You can bank on the penalty being the later of those 3 calculations.
Mortgage penalties vary, a lot. This is easily the most overlooked feature of a mortgage & can easily end up being something people regret not looking into further. On avg, in Canada, most borrowers break their 5 year mortgage before the 4th year. A lot can happen, especially if this is your first purchase.
When you weigh your options, you need to compare the savings on rate to the potential difference in penalty. On that above example, the difference between 2.74% & 2.69% is $10 / month, which is generally less than what most people would assume. Is it worth saving $10 / month for the next 5 years but risking a penalty that could be $7k greater?
Ask the right questions. You’ll be glad you did!
The Age of Entitlement: “Let Them Eat Cake!” —-> “Let Them Have Houses!”
/in real estate /by admin*Foreword: by no means am I against affordable housing options. I think it would be fantastic to find a way for families to live close to dt. The point of this is that there are other options to raise a family than buying a detached home & that tradeoffs have to be made.
I fundamentally do not understand what this #donthave1million campaign is trying to achieve. I’m proudly biased when I say this, but Vancouver is the best city in the world. That’s why I moved here. That’s why millions of people are moving here. It’s what happens in great cities & is going to happen more & more unless humans stop reproducing. With that in mind, what exactly is the solution the #donthave1million rant is all about? If everyone deserves to own a detached single family home within the city limits, where are they supposed to go?
This argument of being entitled to own a house with a yard within a bike ride of downtown is naive. It neglects the basic laws of supply & demand, & confuses needs with wants. The price of real estate has risen in Vancouver because it’s a great city & people want to live here, just as they have for generations before, albeit at a rate not quite as rapid as today. Do you know who deserves to live in that lovely west side house, minutes walk from the beach & drive from downtown? Those who can afford to do so, those that have worked hard, saved & have enough money to pay for it. That’s life. That’s the world we live in. If that’s a hard reality to consider, then readjust your priorities & accept that, like all things in life, it’s a question of trade offs.
Want to buy a house for under $600k? Great! You have a ton of options in Metro Vancouver. Don’t want a 30+ minute commute to work? Great! Buy a condo or town home. What’s that? You don’t want to live in a condo or town home? Ok then, rent a house. Oh, I’m sorry, you want to buy a place? Ok then, figure out what’s most important to you & make a decision.
The reality is you don’t need a cool million to own a home with a Vancouver address. You need about $20k. If you feel that owning a house with a yard is your right, then stomach a longer commute to work, or join the millions of families around the world who live in condos. Trade offs – if this is your first time encountering them, then you’ve lived a very privileged life, my friend.
Let me ask you this: when you start arguing that you deserve a house with a yard in the city, where does it end? When is it enough? At what point is the line drawn where it becomes too much? Do you need a house? Do you need 2000 sq ft? Do you need a yard big enough for kids to play hide & seek in, just as you did when growing up? This is a confusion of needs & wants. It’s an argument that exposes a spoiled generation where we all get medals just for showing up.
You don’t need a million to live in Vancouver. You need to quit thinking you deserve something that millions of others would love to have.
How To Shop For A Mortgage (Part 4 – Mortgage Registration)
/in Misc. /by adminI’ve wanted to do a video on this for some time, as I keep running into clients who are coming up to the end of their mortgage term, can save money by changing banks only to realize that they can’t actually leave without it costing them money. So we’re going to talk about 2 types of mortgage registration –standard charge & collateral charge mortgages. With some banks moving exclusively to collateral charge mortgages, it’s important to understand the differences.
Standard charge mortgages are what most people are familiar with. With this, the amount of your mortgage is registered on title – no more, no less. If you’re buying a $500k place with $100k down, then only that $400k will be registered.
Now, with a standard registration, once you reach the end of your term, it’s almost like you are a free agent again. You’ll get a renewal offer from your bank & if you find a better offer elsewhere, you can move banks without having to worry about paying legal fees all over again. If you can save money leaving, leave! Easy peasy.
Now the reality here is that an awful lot of people don’t bother to shop around at renewal & they just sign the offer they get in the mail & begin a new term. Well lenders know this & count on this & this is why renewal offers are usually not very good. This is why you should always give me a call when you are 4 months from renewal to see what’s out there.
I bring up renewal b/c the differences between standard & collateral charge mortgages are most evident here. With a collateral charge mortgage, you can’t actually leave your bank unless you pay legal fees all over again. In that sense, the lender has their hooks in you a little deeper. They know it’s going to be more difficult for you to move & because of that they may not be as sharp on their renewal offer. So for borrowers who want to keep their options open at maturity & have some negotiating power with their lender, this may not be the best option.
Further to this, with a collateral charge, all of your secured debt (credit cards, lines of credit) that you have with your bank that is interconnected with your mortgage may have grave implications. If you default on one, the banks can go after your property to pay off those accounts. They can even increase your interest rate by up to 10%. You could potentially lose your house.
So who is a collateral charge mortgage good for? The advantage of this is the bank can advance you more money after closing without involving a lawyer. Provided you aren’t exceed the amount initially registered for, if you wanted to set up or increase your line of credit, take out some equity for renovations or investments, you can do all this & save from having to pay the costs of reregistering.
The problem, is most of the banks that register in this fashion don’t give you the choice.
Know what your options are, know the pros & cons of each & make sure you’re committing to the right product.
I’m Ryan with City Wide Mortgage services, contact me to learn more of the different types of mortgages out there.
Ryan Zupan
ryan@citywidemortgage.ca
604.250.6122
How To Shop For A Mortgage (Part 3 – Mortgage Penalties)
/in Misc. /by adminHi Ryan Zupan here with the City Wide Mortgage services. This video is part of our series on what to look for when shopping for a mortgage & today we are going to cover mortgage penalties.
Mortgage penalties, without question, can have the largest impact on how much your mortgage is going to cost you. They can range from very the manageable to the borderline devastating. Some of you have probably heard horror stories or news reports of clients getting hit with penalties of $20k-$30k. I can tell you, these stories are very much true & exactly why you need to know what kind of mortgage you are signing up for.
For this video, we are going to talk primarily about penalties on fixed rate mortgages & the reason for that is with most variable rate mortgages out there, the penalty for breaking is going to be 3 months of interest, so whatever interest you pay per month, multiply that by 3. On the penalty side of things, this is what you want. It’s a lower penalty that what you’ll find with different types of mortgages out there.
Now there are exceptions to that. Right now there are a few variable products out there that have a very low rate, which is great, but they have EXTREMELY high penalties. I’m talking a flat penalty of 3% of the mortgage balance. So on a $400k mortgage, that’s a penalty of $12k, which is huge. Especially when you compare that to what you are saving going with that lower rate option.
On that $400k mortgage, the difference of 0.05% on interest rate, so let’s say 2.3% compared to 2.35%, is around $10 / month, which isn’t really that much. Is it worth risking a penalty that has the potential to be $9k or $10k higher than other options to save a mere $10 / month ? Probably not, so, again, it is vital that you know what you are signing up for.
Now with fixed rate mortgages, the penalty is a bit more complicated. It’s the GREATER of 3 months interest (same penalty as the variable) OR a calculation called the interest rate differential (IRD). The IRD is a formula the lender uses which factors in how much money they will be earning when they relend your money out for the remainder of your term.
For example, if you’re 3 years into your 5 year term, the lender wants to know how much they will earn relending your money out on a 2 year term. If the 2 year rate is higher than your interest rate, then the lender will be better off — the lender is going to make more money. If your rate is 3% & the 2 year rate is 4%, the bank is going to be better off, so your penalty will just be 3 months interest. On the flipside, if rates are lower – if your rate is 3% but the 2 year rate is just 2.5% — then the bank is going to lose money once you break the mortgage. It’s these situations where the penalties can be quite high.
Now, the kicker to all this is that the IRD calculation differs from bank to bank. Some lenders will do a straight rate comparison – if your interest rate is 3% & the 2 year rate is 4%, they compare one rate to the other.
BUT, for some institutions, it is not that simple… some factor in discounts they gave you off of their posted rate, some base the comparison rate on the corresponding bond yield. There are a lot of differences that can really impact what your penalty could end up being.
By no means am I trying to dissuade you from taking a fixed rate. There are certainly advantages of going fixed & for many borrowers that’s definitely the right fit, but I do want you to be asking these questions going in. A mortgage is more than interest rate. Don’t just go for the lowest rate. Know what you are signing up for. Make sure it’s the right fit. You will thank yourself down the road.
I’m Ryan with City Wide Mortgage Services. Please contact me & I’d be happy to go over this in more detail with you.
Ryan Zupan
Mortgage Planner
ryan@citywidemortgages.ca
604.250.6122