Many people would assume that when it comes to mortgages, both Canada and the US are set up the same but this is not the case. In the spirit of Canada Day here are five reasons why it’s so great to have a mortgage in Canada:

1. In Canada lenders offer monthly, semi-monthly, weekly, and bi-weekly payment options while in the US borrowers are generally required to pay on the first of every month.
2. With Canadian lenders, brokers and specialists can offer pre-approvals and rate holds at no cost while in the US a fee is charged.
3. Canadian mortgages can be ported but in the US this is not typically allowed.
4. When it comes to insurance, in Canada the amount is typically added to the mortgage amount and paid up front while in the US borrowers pay monthly and can cancel it when the LTV (loan to value) falls below 80%
5. Canadian pay much less in origination costs for mortgages. In the US there are many “points” and fees tacked on so Americans can generally pay $3,000 - $5,000 vs. the average $1,800 in Canada.

One other great statistic that is interesting to learn is that although the US offers homeowners a mortgage interest tax deduction that is not offered in Canada, in both Canada and the US homeownership is about 68%

Here to help for all your mortgage finance needs,

Stephanie Ostash

The Mortgage Centre

250.801.6467

ostash.s@mortgagecentre.com

CMHC recently surveyed 2,507 new mortgage consumers.  Here’s what they found:

• 70%:  Feel now is a good time to buy a home in Canada
• 1/3:  Expect to move in the next five years
• 73%:  Used their own resources (savings, equity, or RRSP) for their down payment.
• 1/3:  Have previously requested their credit score from a credit bureau.  (Wow.  2/3 have not?)
• 87%:  Believe that 40% is the maximum ratio of monthly gross income that one should spend on debts and housing (It’s interesting that so many people know this. This 40% figure is, of course, a general lender guideline for maximum TDS.)

What matters to homeowners:

• “Getting the best rate”:  This was the number one thing that made customers satisfied with their lender or broker.
• “Service”:  The top reason driving customer satisfaction with brokers.
• “A good relationship”:  The top reason behind customer satisfaction with lenders.

Other interesting market share stats:

• 90%:  The number of people up for renewal who stayed with their existing lender.  That compares to 83% in 2007.  (This is absolutely stunning. Either lender retention departments are getting much better or people are getting more complacent.  In this competitive market, you’ve got to shop around—or, better yet, get a professional to do it for you.)
• 25%:  The number of mortgages originated by mortgage brokers. CMHC said it was 27% in 2007 (See CMHC’s 2007 Mortgage Survey).  (The banks seem to be making a comeback for the time being. They’re most definitely getting more competitive. In addition, we’re seeing a lot of smaller lenders harness the power of the net to drive new business.)
• 44%:  The number of first-time buyers who got their mortgage through a broker.  (This is up sharply from 35% in 2007.)

Here for all your mortgage finance needs...

Stephanie Ostash

The Mortgage Centre

250.801.6467

ostash.s@mortgagecentre.com

View this recently rented Single Family Home or see all my home sales

IS IT TIME TO LOCK IN?

ROB CARRICK

00:00 EDT Tuesday, June 16, 2009

Jas Grewal's reaction to the recent runup in interest rates was to abandon a sweetheart of a variable-rate mortgage in favour of a safer, but more expensive, fixed-rate mortgage.

Mr. Grewal, you should know, is a mortgage broker. A mortgage broker who sees the potential for much higher rates in the future.

"I'm fairly conservative and I'm locking in," said Mr. Grewal, of the Mortgage Centre in Toronto. "Rates are starting to spike and I think they're going to continue."

Variable-rate mortgages like the one Mr. Grewal has are unaffected by rate increases over the past couple of weeks. But fixed-rate mortgages are on the rise, and he's worried about a pervasive trend toward higher borrowing costs. He may have a point -- it may be time to bail on that variable-rate mortgage and lock in for the longer haul.

Ultralow rates are a big reason why there are signs of life in the housing market. Sales activity and prices are have been rising this spring; the average resale price of a home sold in May was nearly $320,000, according to the Canadian Real Estate Association, bringing prices back to where they were before last fall's financial meltdown.

But rates are ticking up again. Five-year mortgages with a juicy discount are now going for about 4.3 per cent after two recent rate increases that lifted them off historical lows in the 3.7-per-cent range.

Meanwhile, the prime rate, used as a base rate for variable-rate mortgages, continues to sit at 2.25 per cent.

Mr. Grewal's concern is that rising inflation will send short-term interest rates soaring to a point where a five-year mortgage at today's rates will look like a comparative bargain.

Statistically, variable mortgages are a better deal than fixed mortgages 88 per cent of the time, Mr. Grewal said. "But I think we're in that 12-per-cent zone right now."

Whether you're thinking of locking a variable rate into a fixed-rate mortgage or of renegotiating a mortgage you took out years ago to benefit from lower rates today, you have some thinking to do about rising borrowing costs.

There's no consensus that the worst of the global financial crisis/recession is over. Yet, financial markets are starting to consider the risk that inflation will be stoked by all the stimulus that governments are injecting into the economy. The result is that interest rates are starting to creep higher in the bond market, which influences the cost of fixed-rate mortgages.

"The general trend toward higher rates, and away from those extreme lows we saw at the turn of the year, is likely to be the dominant theme over the next year as the global economy and global financial markets heal," said Douglas Porter, deputy chief economist at BMO Nesbitt Burns.

It's important to understand that there are two tracks for interest rates. One is the bond market, where investors tend to sell bonds when they see higher inflation and interest rates coming and to buy bonds when they see rates falling or are petrified with fear about a global financial meltdown. That's what's happened in the past nine months or so.

The second track is the one the Bank of Canada influences through its overnight rate, which has a major impact on the prime rate charged by the banks to their best customers. The prime, in turn, is the key to variable-rate mortgages.

The two interest rate tracks do not run parallel right now. The Bank of Canada said in April that it would keep its overnight rate steady for as long as a year if required to steady the economy, and last week central bank Governor Mark Carney said there's a risk in removing support to the economy too soon. BMO's Mr. Porter said it's possible that the Bank of Canada could start raising its benchmark rate in the early part of next year. So here's the question if you've got a variable-rate mortgage: Do you jump into a five-year rate that is still close to historical lows, even after the recent move up, or do you coast?

Mr. Grewal has gone with the first option, and you can see his commitment to this stance in the fact he's giving up on a variable-rate mortgage with a whopping discount of 0.9 percentage points off prime. When the financial crisis bit, banks changed their policy of offering discounts off prime and started selling variable-rate mortgages at prime plus as much as one to 1.5 percentage points.

Lenders offering variable-rate mortgages generally allow customers to lock into a fixed-rate mortgage at no charge, but Mr. Grewal is going a different route. He's breaking his mortgage, paying a penalty and moving to another lender. The reason: His new lender is holding a five-year rate of 3.69 per cent for 120 days, which means he can enjoy the ultralow rate on his existing mortgage a bit longer before jumping into the security of a fixed rate.

There's good reason to use the same strategy if you're breaking a fixed-rate mortgage. If rates rise during the period your new rate is being held, the penalty you'll have to pay should decline. Remember, these penalties are tied to the difference between the rate you got originally and rates of the moment.