28 Feb

MORTGAGE CHANGES = DIMINISHED PURCHASE POWER

Bank Industry News

Posted by: Ron Price

There may finally some progress being made with the Federal Government after Dominion Lending Centre’s Founder and CEO, Gary Mauris, presented to the Standing Committee on Finance in Ottawa on February 8th about the imbalance in the Government’s new mortgage rules.

In October 2016, the Federal Government made changes that are limiting and threatening to average Canadians and their ability to buy housing and access equity from their homes… Especially those of that live outside of major city centers.

How is purchase power affected? Let’s look at Barry & Louise’s situation. Combined, they earn $65,000/year. He works at a local factory and she at a grocery store. They have great beacon scores, a $400 car loan payment and minimal credit card debt. They have $16,500 saved for a down payment on their first home.

Before the changes, Barry & Louise would have been able afford to purchase a $330,000 home with 5% down, qualifying for a mortgage of $313,500, paying 2.89%.

Now, because they are forced to qualify under the “stress test” at a rate of 4.64%, they can only qualify for a $253,500 mortgage, lowering their affordability to $270,000. That’s a $60,000 difference in purchasing power. They are priced out of the market.

The bottom line as we see it, is this. There was no logical, ethical reason for the Federal Government to implement such rigid regulations so swiftly. The mortgage default rate in Canada is less than 1/3 of 1% … that’s only 0.003%!!! Mortgages are not the issue. High interest rate, easily accessible consumer debt products are.

Through the Mortgage Broker Channel, monoline lenders now account for 38% of all mortgage funding in Canada. This is great for Canadians! Competition is always beneficial for consumers. Look at airlines and cell phone companies. Lack of choice = monopoly, which means more expense and less flexibility for consumers. The same thing goes for mortgages.

The only mortgage institutions that don’t benefit from more choice are the big chartered banks. Banks make multi-billion dollars in profit, year over year. They are in the business of cross-selling multiple high interest rate products and charging massive penalties for early mortgage pre-payments.

The moment a bank has a new mortgage client, they start enticing them with great offers on lines of credit, credit cards etc. They have the power to lock you in and change the rates on the fly, making it difficult to go elsewhere. They often don’t approve clients for refinances for debt consolidation as they make their money on your consumer debt.
The government consulted with a few banks before making these rash changes. They did not consult with the broker channel or monoline lenders. There is something unjust about this and it favours the banks. We support choice, competition and what’s best for Canadians. Contact us and see how we can help protect you.

17 Feb

WHEN BLISS COMES BACK TO BITE

General

Posted by: Ron Price

We all know the saying, “ignorance is bliss”. Sometimes it is, until it bites you badly.

We see it all too often, especially with couples. One is more of a spender than the other. One is more of an earner than the other. One is more in touch with finances with the other. They both get into debt together. Whether they stay together or split up, that joint debt bounds you more together than marital vows ever could.

Mark and Terri have been long time clients of ours. They first came to us 12 years ago when they bought their first home. Long-standing clients of a major bank, the bank had told they were pre-approved for a healthy-sized mortgage only to be denied once they found a home to buy.

The bank hadn’t done the vital work upfront and the pre-approval wasn’t underwritten. (Call us and we’ll be happy to explain more about that.) They came to see us about options. It took a lot of work and determination but we swiftly found a solution and got them into their home against all odds.

Today, Mark and Terri have found themselves living paycheck to paycheck. Why?

Terri applies for appealing credit products, easily qualifies and maxes it up. Mark is oblivious to how finances work. His parents never used credit so it feels overwhelming to him. Terri knows more and he trusts his wife to take care of it. He earns, that’s his role. They put two kids through college and helped one of them out with a car loan. They both feel good about that. For Mark, financial ignorance has been bliss.

Today, he feels more stress than ever. Somehow they are bleeding at the seams. They have a small mortgage compared to most neighbours. They only owe $190,000 on their home but they somehow owe $95,000 in consumer debt. Their mortgage payment is $1100/month and 50% of that goes to principle. They pay at least $2000/month to multiple credit sources averaging 18% interest, and that’s just the minimum payment. That only covers interest.

Deflated, tired and less than a decade away from retirement, Mark believes that they will never own their home. This is a mindset that can change.

The mortgage is not the problem. The problem is consumer debt by way of credit cards, unsecured lines of credit at astronomical interest rates and vehicle loans. All of these are EASY to obtain. Too easy. It’s affecting their health and marriage.

While we were able to help Mark and Terri with a refinance for a fresh start this time (they have equity in their home, decent income and credit) they need to change their spending habits. Ignorance is not bliss. Be informed, be active in your financial life.

Contact us and we will help assess where you are and where you want to be.

13 Feb

WHEN ENOUGH IS ENOUGH

Success Stories

Posted by: Ron Price

It’s more common than we realize and it’s very difficult to talk about. While most victims of domestic abuse are women, we acknowledge that this does happen to men as well. In this article, we will be sharing our experiences from a woman’s point of view. This is a highly emotional topic and one that our team has seen all too often, both through our business and also personally.

Domestic abuse. It’s highly likely that someone you know has been or is a victim of domestic abuse in some way, shape or form. Maybe that someone you know is you.

Whether it’s physical, verbal, emotional, financial or a combination of many, there are some common emotions victims share: fear, shame, guilt, lack of self-esteem and helplessness.

What you might be shocked to learn, is that if you are on title for your home, there is hope and we can find solutions you might not have dreamed of.

For instance, Ingrid had been making all payments on the home that she owned with her husband. For many reasons, she finally left him. She took on a rental payment for an apartment while she sought help for how to keep her home.

In the meantime, her credit suffered as she struggled to pay her monthly (mostly joint) consumer debts – credit cards, lines of credit, and vehicle loans etc. It was impossible for her to keep up. The stress of this on top of her personal situation was too much to handle.

She came to us for mortgage advice and we helped her to devise a plan for her finances, which helped give her a sense of empowerment. With these tips, she managed to find the confidence and strength to negotiate a legally binding agreement that enabled her to keep the equity in her home.

We found an alternate lending solution to help for the short-term while she rebuilds her credit. With steady payments and stable employment, the goal is to get her into a prime mortgage within 3 years.

Ingrid was committed and willing to do the work, and that’s what is making her case a success story. To quote Ingrid, “The Price Team was able to perform a miracle that has me keeping my home. I highly recommend them.”

No matter how dire your situation is, there is help. We can provide you with financial guidance if you have ownership in a home. Reach out if you are in need. We truly care and are here to help.

7 Feb

GET OUT OF DEBT JAIL

Debt Consolidation

Posted by: Ron Price

With some pride when we do the initial analysis client announces I only have $120,000 mortgage. With a house worth $450,000, the client is almost giddy with excitement that their mortgage is almost gone. But hey wait a minute, with credit pulled the client also owes $90,000 on a line of credit and it’s maxed. This line of credit is a 2nd mortgage against the property.

Oh and there is a $30,000 Visa, also maxed. Guess what? Under the terms of their bank collateral mortgage this is also now all secured. They thought it was unsecured because the bank (not surprisingly) never told them. Yep even the car loan for $35,000 with the same bank also now secured.

So you see the clients have actually not paid down a cent over the past five years because they actually increased the amount owed in both secured and unsecured debt. This is all an illusion made for Canadians to believe ‘they are paying their mortgage off faster’.

Now, of course, the mortgage was originally negotiated at a decent rate, so the homeowners are under the impression they are actually got an amazing deal. But on further examination, the mortgage is at 2.79%, the line of credit is at 3.2%, the Visa is at 18% and the car loan is at 12%. So that mortgage is actually costing around 6%. But worse yet all disposable income is gone with payments.

Now with all eggs in one bank basket, unsecured debt is now secured under the terms of the mortgage, so the visa is now technically part of the mortgage debt. The bank registered 125% of the property value as a mortgage against your home.

Remember it’s the bank’s goal to have you take 5 credit avenues; a mortgage, line of credit, 2 visas and a car loan in order to get you in just enough debt that you are just treading above water and most of your pay cheque is eaten by payments and interest. The bank extends just enough rope so you are dangling but not dead. Dying is not good but choking is okay. And now they have full control over you and your life. Remember they love professional and high income earners because there is more potential for profit. We see this happen time and time again to all income levels.

Time to get wise to the bank tactics that keep you in perpetual debt. If you have a mortgage for heaven sakes pay it down for good, but not at the expense of having higher interest debt. That’s completely counter productive. Don’t believe you have a $120,000 mortgage when actually owe $275,000 and it’s all with a major bank.

Get a ‘get out of jail’ free card from us. We have shown hundreds of clients how to get out of debt forever and actually pay off their mortgage. Even if you have screwed up before, you can still win the debt game with our helpful advice. Real freedom comes when you don’t owe the bank a cent.