Blog Post

Changing Interest Rates January 2018

Anita Groves • Jan 30, 2018

Over the last couple of weeks, you’ve no doubt heard that interest rates have been on the move. Most fixed rate products have seen a small increase in rate, while just last week the Bank of Canada announced an increase that impacted the prime lending rate. So if you are in a variable rate product, your payments have gone up by roughly $13.10 per every $100k mortgage balance owing. If you’re looking to get into the housing marketing and looking for a fixed rate product, things have just gotten a little more expensive for you as well… but what if you already have a mortgage, with a fixed rate, do these changes impact you at all? Well, as it relates to your mortgage, no, but it might impact your investments.

Nest Wealth; one of Canada’s leading online investment advisors, just released an article titled Interest Rates Changed – Should Your Investment Portfolio? It has been included below for your reading pleasure! If you have any mortgage questions, please don’t hesitate to contact me anytime!

Interest Rates Changed – Should Your Investment Portfolio?

The reason some investors who own bond funds are concerned about the recent interest rate hike is because when rates go up, bond prices go down. So this week’s rate hike, has led some investors to question whether they should scale back or dump their bond funds.

There are no straight answers to this question because there are a number of variables which are too complex to cover in this one post. But there are a couple of rules of thumb that we can offer to help guide investors.

Bonds Have Different Levels of Sensitivities

Bonds are really just an IOU. When you buy a bond, you’re giving a loan, and in return, you get a regular stream of interest payments until the borrower returns your loan in full (i.e. the bond’s term).

When rates go up, this has less of an impact on short and medium term bonds (bonds with terms between 1 to 5 years). The simple explanation is that lenders and borrowers only need to accept the lower interest payments for a shorter time. So the recent interest hike had less of an impact on this group of bonds.

Bonds Play a Unique and Important Role

It’s important to understand that bonds, like other asset classes, have a specific role in a portfolio. Whereas equities are meant to provide the potential of growth, the main responsibilities of bonds are to provide stability to your portfolio.

As equities and bonds tend to perform in opposite directions. That is, when equities are performing well, bonds are slowing down. Since market conditions change continuously, including a mix of equities and bonds into your portfolio helps to minimize the return fluctuation in your portfolio. This is particularly important for the investors nearing retirement who need more stable and consistent returns.

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Anita Groves

PROFESSIONAL MORTGAGE BROKER

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Bridge Financing and Deposit Lending

By Anita Groves • 08 May, 2024

Let’s say you have a home that you’ve outgrown; it’s time to make a move to something better suited to your needs and lifestyle. You have no desire to keep two properties, so selling your existing home and moving into something new (to you) is the best idea. Ideally, when planning out how that looks, most people want to take possession of the new house before moving out of the old one. Not only does this make moving your stuff more manageable, but it also allows you to make the new home a little more “you” by painting or completing some minor renovations before moving in. But what if you need the money from the sale of your existing home to come up with the downpayment for your next home? This situation is where bridge financing comes in. Bridge financing allows you to bridge the financial gap between the firm sale of your current home and the purchase of your new home. Bridge financing allows you to access some of the equity in your existing property and use it for the downpayment on the property you are buying. So now let’s also say that it’s a very competitive housing market where you’re looking to buy. Chances are you’ll want to make the best offer you can and include a significant deposit. If you don’t have immediate access to the cash in your bank account, but you do have equity in your home, a deposit loan allows you to make a very strong offer when negotiating the terms of purchasing your new home. Now, to secure bridge financing and/or a deposit loan, you must have a firm sale on your existing home. If you don’t have a firm sale on your home, you won’t get the bridge financing or deposit loan because there is no concrete way for a lender to calculate how much equity you have available. A firm sale is the key to securing bridge financing and a deposit loan. So if you’d like to know more about bridge financing, deposit loans, or anything else mortgage-related, please connect anytime! It would be a pleasure to work with you.

Getting a Mortgage After Bankruptcy

By Anita Groves • 01 May, 2024

Sometimes life throws you a financial curveball. Bankruptcy and consumer proposals happen. It doesn’t mean your life is over, and it doesn’t mean you won’t ever qualify for a mortgage again. The key to financial success here is getting things under control as quickly as possible. You must demonstrate to the potential lenders that what happened in the past won’t happen again in the future. So if you’re thinking about getting a mortgage post-bankruptcy, lenders will want answers to the following questions: How long have you been discharged? Securing a mortgage will be dependent on how long it has been since you were discharged from your bankruptcy or consumer proposal. Most lenders consider the discharge date on both to be your new ground zero. And while there is no legally defined waiting period for when you can apply for a new mortgage post-bankruptcy, what lenders will assess is how you’re managing your finances after your financial troubles. Have you established new credit? You can show lenders that they can trust you after bankruptcy by establishing new credit and managing that credit flawlessly. So as soon as you’ve been discharged, it’s a good idea to get a secured credit card and start rebuilding your credit score. To be considered completely established, you’ll want to have two years of credit history on two trade lines with a credit limit of $2500 on each trade line. You’ll also want to make sure that you have no late or missed payments. How much do you have available for a downpayment? The more money you have to put towards purchasing a property, or the more equity you have in your property in the case of a refinance, the better your chances of getting a mortgage. The more money you bring to the table, the more comfortable a lender will feel about the risk they take of losing their investment should you run into future financial difficulty. What is your total debt service ratio? Another consideration lenders will look at is how much money you make compared to the cost of making your mortgage payments. So it probably goes without saying that the more money you make compared to the amount you want to borrow, the better. Conventional or insured financing. If you’re looking to get the best mortgage products available, here are some of the things a lender will want to see: You’ve been discharged for at least two years plus a day. You’ve established your credit (as listed above). You have at least 5% down for the first $500k of the purchase and 10% down for anything over $500k. If you don’t have a 20% downpayment, you will be required to secure mortgage insurance through CMHC, Sagen (formerly Genworth), or Canada Guaranty. The cost to service the property and all your debts don’t exceed 44% of your gross income. Alternative lending As independent mortgage professionals, our job is to provide solutions and strategies for our clients. As such, in addition to dealing with many traditional lending institutions, we also have access to lenders who specialize in working with clients whose financial situation isn't all that straightforward. These private lenders offer alternative lending solutions that consider the overall strength of your mortgage application. While you won’t qualify for the best rates and terms on the market by going with an alternative lender, if you’re looking for options, you might find that alternative lending is a very reasonable solution for you. Alternative lending isn’t for everyone, but it’s an excellent solution for some, especially if you’ve gone through a bankruptcy or consumer proposal and need a mortgage before fully establishing your credit. Get in touch anytime. So whether you’re looking for a plan to help you qualify for a mortgage with the most favourable terms or if you need something more immediate. Please connect anytime. It would be a pleasure to outline your options and work on a plan to get you a mortgage.