4 Apr

Rate Hike Worries – Self Employed Applications


Posted by: Gerry Gillan

Interest rate hike worries 4-in-10 homeowners

 Four-in-10 Canadians would be unsure about whether they could afford their homes if their mortgage rate went up by as little as two percentage points, according to a new study from the Bank of Montreal.

 The survey, compiled for BMO by Leger Marketing, found 43% believe an increase – to 5% from 3%, for example – would either hamper their ability to pay or leave them on unsure footing.

 The survey was conducted February 21st to 23rd – two weeks before BMO sparked a round of special rate reductions among Canadian banks. The survey’s results were announced a day before the five-year special rate ended last Wednesday.

 BMO’s special dropped the five-year rate by half a percentage point to 2.99% from 3.49% and other banks followed.

 Click here for the Canadian Business article.

  2012 federal budget highlights

  The budget came down last week with positive news for our industry, as Finance Minister Jim Flaherty did not announce any changes to down payment requirements or maximum amortizations.

 Click here to read the 2012 federal budget highlights from Canada.com.

Stated income just as good as T4: experts

It’s not that you’re a second-class citizen when applying for a mortgage if you don’t have a T4 slip. But the banks may start taking a closer look at your finances.

 Stated-income customers, or the self-employed, who don’t come to their bank officer with something as simple as a government tax form with their income on it seem to be in crosshairs of the industry.

 One bank insider said financial institutions have not been dealing with people’s declared income “because nobody believes it. They look at their behaviour and put more weight on that. They look at how you transfer money, pay your bills and generally how you conduct your life.”

 The source said any changes could “become a bigger deal for them.”

 Click here for more from the Financial Post.

 Collateral mortgages: Why banks like them

 If you’re buying a house and are shopping for a mortgage this spring you may come across something called a collateral mortgage. This home financing tool has been around for a while, but mainly in the background.

 Now it’s going mainstream with both TD Canada Trust and ING Direct abandoning the conventional mortgage in favour of this type of financing exclusively. Other big banks make collateral mortgages available, but for now offer both kinds.

 Many consumers hunting for a mortgage would be hard pressed to explain the difference between the two, but here it is: With a conventional mortgage, you and your lender agree on how much you can borrow, the length of the term and the interest rate. As an example, say the house you’re buying is worth $200,000. With 20% down you would borrow $160,000. You might select a fixed-rate, five-year term, which this week is between 3% and 4%.

 With a collateral mortgage, you still have an agreed interest rate and term, but the bank registers a charge of up to 125% the value of your home, provided you have at least 20% equity in it. In this example the charge would be $200,000 plus up to another $50,000. That’s because a collateral agreement assumes you’ll want to borrow more in the future and so makes this extra amount available now. As long as you maintain 20% equity in your home, you borrow up to 80% of its value.

 Click here to read more from The Star.