VERICO Designer Mortgages

Canwest News Service

FP MortgageCash-back

The arrival of spring signals summer moving season and the return of even more heated competition between banks for consumer mortgages. Case in point: the current flogging of cash-back mortgages.

Cash-back mortgages give consumers a percentage of their mortgage in cash to spend as they please. The money could be used to buy new furniture or appliances, pay for closing fees or invest in the stock market – whatever you like.

The catch? Cash-back users generally only get the posted mortgage rate instead of the discounted rate that qualified mortgagers often obtain. “The difference between the posted rate and discounted rate is huge sometimes,” says Anne Marie Found, an Oakville, Ont-based mortgage broker at Invis Inc. The posted rate for a five-year, fixed mortgagethe standard term for a cash-back offerat many major banks is around 5.5%, but the discounted rate can be as low as 3.89%.

“The banks will get their money either one way or another,” says Found. “If they’re going to give you cash back, they are going to charge you more.”

Most customers, however, are still either going for a fixed five-year, fully discounted rate, or an even lower variable rate, but while cash-back mortgages are still a small part of a bank’s business, they do have benefits, says Chris Wisniewski, group product manager, real estate secured lending, at TD Canada Trust.

They can be particularly useful for first-time homebuyers who don’t have enough money left over after making the minimum 5% down payment to buy furniture to appoint their new property or who want to make immediate upgrades. “A cash-back might be a good alternative versus putting those purchases on a credit card or getting a loan, so the interest rate savings would be significant,” says Wisniewski.

However, Wisniewski doesn’t advise taking a cash-back offer if someone is planning to sell the house before the five-year term is up. That’s because there are the usual fees associated with breaking a mortgage early plus some of the cash-back has to be paid back.

“The amount depends on the term remaining, but it’s usually pro-rated over whatever the remaining term is at the time that you break it,” says Wisniewski. For example, if you have 80% of the term left, you’ll probably have to pay back 80% of the cash-back received.

TD Canada Trust currently offers a 5% cash-back mortgage up to a maximum $25, 000. In other words, on a $300,000 mortgage you would get $15,000 back. Scotiabank has a very similar deal, while RBC and CIBC are offering up to 7%.

CIBC is also offering a new wrinkle: giving consumers 2% cash back and a mortgage rate of 3.99% on a five-year rate if they switch their existing mortgage from another financial institution to CIBC. Considering CIBC’s posted five-year rate is 5.39%, the savings could be quite substantial depending on your current rate.

However, some or even all of the 2% cash back may end up going to your existing mortgage backer to pay the penalties associated with breaking your fixed-rate mortgage early. The offer also only applies to straight transfers and not refinancing.

Stephen Forbes, executive vice-president of marketing, at CIBC, says there has never been a better time to find a low variable rate or flexible fixed-rate terms, so the key is figuring out what works best for you. “There are so many options that it makes sense to get advice,” says Forbes.

Qualifying for cash-back programs is usually the same as qualifying for a five-year mortgage. The maximum mortgage you can get is still 95% of the purchase price, although some lenders may still allow homebuyers to apply the cash back to their down payment to help come up with the necessary 5%. Scotiabank is one with their Free Down Payment program.

“I’m not a big fan of cash-back offers and I don’t push them, but I have done them,” says Lois Volk, an Invis mortgage broker in Toronto. “I wouldn’t recommend it for the average purchaser.”

But Volk says there are some cases where using cash-back programs to make a down payment might make some sense. For instance, young professionals a few years removed from university might not have the required down payment because they’ve been busy paying off their student loans, but they have the income and job stability to otherwise handle a mortgage.

For the average mortgager there are better ways to get the 5% so that you can get the better rates, believes Found. “In the long run, it will be much cheaper for you if you use your RRSPs, get a gift from a parent, or save so much a month and then come back to me when you’re ready,” she says.

And if you really do need some financial help to buy new furniture, says Found, “You can always go to Leon’s and not pay for a year and save the money that way.”

Check us out in the media!

Below are various articles and news clips featuring VERICO Canada.

1. John Ribalkin from VERICO Nova Financial Services Inc. was recently featured in the article “Mortgage Help” in the North Shore Outlook News. Read it here. 

2. A feature article on Wayne Kainu from VERICO Boomerang Financial titled “Lacing Up for Success” was included in the recent issue of CMP Magazine, Issue 5.2. In the article, Wayne talks about his early career as a speedskater and how this has helped put him on the path to success. Read it here.

3. VERICO Canada recently launched its website development tool, VERIsite and it was included in the “News Bites” section of the recent issue of CMP Magazine, Issue 5.2. Read it here.

VERICO newsmakers are just one way we bring the latest in Mortgages to our clients. We also work hard to get you the very best rates. Contact me today and find out how I can help you with your financial needs.

GB

Financial Post

January 21, 2010

When Hamilton, Ont., residents and partners Kathy Funke and Dan Perryman wanted to purchase an investment residential property in 2000, they did what most Canadians do when it’s time to borrow. They headed to the bank branches in their area.

They shopped around a bit, made lots of phone calls, compared mortgage conditions and rates and then signed.

“That was our first experience. We didn’t really know where to start. And I didn’t know anything about mortgage brokers at that time. The bank seemed like the obvious place to start,” said Ms. Funke, 45.

But in retrospect, they found the whole experience exhausting.

“During our first experience we tried to shop around. The banks discouraged that. They gave us some story that because we had a mortgage being approved and when another bank does the same thing it shows that another mortgage is being approved,” said Ms. Funke.

Three years later when they were shopping for another house, they had a different strategy.

“We didn’t even go to the bank then…We were just so frustrated from the last experience that we didn’t want to run around to the banks. We figured we couldn’t do any worse so we just put ourselves in the broker’s hands and let her do the shopping around for us. We use insurance brokers for insurance, why wouldn’t we use a mortgage broker?” said Ms. Funke.

Dan and Kathy are part of a growing number of Canadians foregoing the traditional walk into the bank branch and instead sitting down with the local mortgage broker.

In their case they used Grimsby, Ont.-based Verico One Mortgage Corporation.

This growth is a core finding of Maritz Research Canada, which studied the broker industry on behalf of the Canadian Association of Accredited Mortgage Professionals (CAAMP)

“In the past, the first or only place a person would go when looking for a mortgage was to their local bank, however more and more Canadians are now seeking out the services of Mortgage Brokers to help them navigate the biggest purchase of their lives,” concludes study author Rob Daniel, managing director, Maritz Research Canada.

The Maritz Research concluded that the mortgage brokerage channel handled 23% of all mortgage activity in 2008. The broker channel is particularly strong in Western Canada (34% of all activity in Alberta, 27% in British Columbia). In addition, women are more likely than men to deal with mortgage brokers. (26% vs. 20%).

Young Canadians are much more likely to consult with and deal with brokers than their older counterparts; Brokers represent 28% of mortgage activity among 18-34 year olds, 24% among 35-54 year olds, and just 17% among those 55 and older.

A mortgage broker works as a conduit between the buyer and the lender. In many cases, the mortgage broker is informally representing lending institutions. The banks have used brokers to outsource the job of finding and qualifying borrowers.

Dan and Kathy felt they got a better interest rate than the banks offered and there were no brokerage fees. And they wanted a mortgage that offered an annual paydown of 20% with no penalty on the balance outstanding.

Maritz Research Canada concluded that the average Canadian who renewed or renegotiated through a broker saw their interest rate reduced by an average of 125 points, compared with 114 among those who dealt directly with a bank or credit union.

For Toronto resident Leanne Bernardo, the mortgage broker not only represented a one-stop shop, it provided a number of “add ons.” These included a line of credit, a life insurnace option, annual and monthly lump sum payment options without penalty and weekly interest rate alerts. The variable interest rate selected was comparable to what the banks offered.

“We just wanted to have a number of different options presented to us and we felt that going through a broker would give us an unbiased opinion of different options. Otherwise we would have gone to three or four different banks to get our options. It was great for us in terms of time efficiency,” says Ms. Bernardo.

And then there is the personal service. James Bell, of Toronto-based Ultimate Mortgage Corporation, has been arranging mortgages since 1989. He’s been dealing with some of his customers for 15 years.

“People get very frustrated when they are dealing with banks because there’s such a turnover of staff, it’s very difficult to build a relationship with a mortgage officer. Even if they are successful in establishing a relationship now it’s not likely that person will be in the same branch in the same position five years down the road,” says Mr. Bell.

The broker is ideal for those who would have difficulty or would not normally qualify for a conventional bank mortgage.

When Karl Klos was co-purchasing a house with a friend in 2006, his friend was working but he wasn’t. They were having trouble getting approved. They were offered $250,000 in private financing at just under 6%. When that didn’t work out they ended up being referred to Toronto-based The Mortgage Centre (www.clickjohn.com) which found them a mortgage at 4.35%

And then there are those who are seeking second mortgages to save their homes.

“The idea is to solve their problems and not to put them into more problems. And I would say we’re very successful at that. There are always situations that go wrong. But by far the highest percentage of them work,” says Jeff Atlin, a mortgage broker and president of the Independent Mortgage Brokers Association of Ontario.

But one thing consumers might end up doing is shopping for a mortgage broker. Unlike a bank, depending on the complexity of the deal and level of risk, mortgage brokers will charge fees. In one case, a low risk $240,000 mortgage on a $320,000 home in Toronto brought $3,200 in fees.

“It really is on a per deal basis. I wouldn’t say it’s what the broker feels they can get away with. I would hope that people would have higher standards than that. There are some deals that are quite time-consuming and perhaps a higher fee would be reflective of the time that’s necessary to put it together so the borrower ends up with a mortgage that they are really satisfied with,” says James Bell.

According to one banking insider, the banks are chilly about mortgage brokers because they make it a more competitive market in which interest rate competition takes away the ability of the local branch to hold firm on posted rates.

As for Dan Perryman and Kathy Funke, they’re making it a habit. They currently have two rental properties and live in a third house. But it doesn’t look like they are going to stop there. They have another home purchase going through in April. And they only plan one stop and that is to Verico One Mortgage Corporation.

“We wouldn’t even consider anybody else. If it isn’t broke you don’t fix it,” says Kathy Funke.

Bank of Canada cut its overnight lending rate by 0.25% to a historic low of 0.25%.

The Bank of Canada also stated that it will keep the key overnight rate at 0.25 percent until mid-2010.

Various Canadian Banks quickly cut their Prime Rates following this announcement by 0.25% to 2.25%.

The Bank of Canada’s next rate announcement is due June 4.

Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com
www.ginaburgio.com

Each VERICO Broker is an independent owner operator.

Bank of Canada cut its overnight lending rate by 0.50% to 1.00%, the lowest since the central bank was formed in 1934. The decrease was inline with most economists expectations.

The previous lowest rate level set by the Bank of Canada was last seen at 1.12% in 1958.

In the past few days leading up to this morning’s announcement by the Bank of Canada, a few lenders began cutting some of their fixed term mortgage rates. Various Canadian Banks quickly cut their Prime Rates following this announcement by 0.50% to 3.00%.

Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com
www.ginaburgio.com

Each VERICO Broker is an independent owner operator.

Many economists expect that the Bank of Canada will cut interest rates to a record low next week on January 20th to stimulate the economy. Its expected that the Bank of Canada will cut its rate by 0.50% to a record low of 1.00%. The Canadian Banks are expected to follow with a cut to their prime rates, which are currently sitting at 3.50%.

European Central Bank to cut its trendsetting interest rate to two per cent on Thursday.

Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com
www.ginaburgio.com

Each VERICO Broker is an independent owner operator.

Deadline March 2, 2009: Post Courtesy of Carolyn Moshtagh

As part of your financial security plan, a registered retirement savings plan (RRSP) loan can help you maximize your annual contribution or catch-up on unused RRSP contribution room. The loan:

• Reduces this year’s tax bill through an income deduction equal to the amount of your allowable RRSP contribution

• Gives you more money earlier to help grow your investment

• Potentially creates a larger nest egg down the road

An RRSP loan means more money works now towards your future retirement. With a convenient Solutions Banking™ loan, the process is easy.

Contact me today for details.

Carolyn Moshtagh
Financial Security Advisor
905-332-3400, ext. 245 office
416-500-9195 cell
Fax: 905-332-3999
carolyn.moshtagh@f55f.com

Freedom 55 Financial and design are trademarks of London Life Insurance Company.

TM Solutions Banking products and services are distributed by Freedom 55 Financial, a division of London Life Insurance Company and is a registered trademark of Power Financial Corporation. National Bank of Canada is a licensed user of these trademarks. Solutions Banking products and services are provided by National Bank of Canada.

The Bank of Canada on Tuesday cut its key lending rate by 75 basis points to 1.50%, more than many economists had expected. This is the lowest since 1958.

Lower interest rates, if passed on by the commercial banks, encourage businesses and households to borrow and spend for expansion and consumer goods, thereby stimulating economic activity.

The interest rate cut today by the Bank of Canada was this biggest cut since October 2001.

The record low for Canada’s key rate was 1.12 percent in 1958, a time when it was based on treasury yields rather than actions by policy makers.

The bank’s next scheduled date for setting interest rates is Jan. 20.

Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com
www.ginaburgio.com

Each VERICO Broker is an independent owner operator.

Bank of Canada is expected to lower interest rates this Tuesday… many economists are forecasting a half-point chop to their bank rate to 1.75 per cent, the lowest since 1960.

Interbank funding spreads have narrowed by more than half since mid-October. This is making it possible for banks to pass on the central bank rate cut to customers in the form of lower prime rates.

Prime rates are the rates for loans to banks’ best corporate borrowers and are the base for lending on everything from mortgages, lines of credit, consumer loans and car loans.

Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com
www.ginaburgio.com

Each VERICO Broker is an independent owner operator.

Finance Minister Jim Flaherty pledged today to triple the amount of mortgages the government can buy from banks to as much as C$75 billion.

The Canadian Gov’t, using its crown corporation, the Canadian Mortgage and Housing Corp. (CMHC), purchased $25 billion in mortgages last month.

Allow me to explain in simply terms what the government is in fact doing…

The gov’t via CMHC has insured many mortgages for the banks. In other words, CMHC has sold the banks default insurance on mortgages that the banks have provided to their clients, which guarantees that CMHC will cover any shortfall realized by the banks in the event of default by their clients. The banks issues these mortgages to their clients using their own money, and the bank waits for repayment based on the terms of the mortgage, as with any other typical mortgage.

As a result of the recent program announced by the Cdn Gov’t to purchase mortgages, CMHC is in essence purchasing mortgages from the banks that they have previously insured…. in other words, purchasing mortgages from the banks that they were already on the hook for. These purchases allow the banks to cash in these mortgages now (so that they can free up cash to ideally put towards lending to clients interested in new mortgages), while CMHC and the Cdn gov’t takes on no greater risk exposure for these mortgages since they were previously insured by them.

 Gina Burgio, Mortgage Agent
VERICO Designer Mortgages Inc.
Toll Free: 1-877-345-6265
Fax: 1-877-345-6256
Email: gina@ginaburgio.com
www.ginaburgio.com

Each VERICO Broker is an independent owner operator.