30 Oct

Your Fall Mortgage Update 2018


Posted by: Alisa Aragon-Lloyd

The slowdown in the housing market in the Greater Vancouver area continued last month as the market still adjusts to the provincial budget hike, the foreign purchase tax and the suggested speculation tax that could be introduced in the fall along with stricter mortgage lending rules and higher interest rates. Additional rate hikes by the Bank of Canada are expected to come this fall, likely in late-October now that the new United States – Mexico – Canada Agreement (USMCA) has been reached.

While home prices did increase in the past few years, prices are now coming down. Even though there are a lot of homeowners that have a lot of equity in their properties, for them to be able to use it they still have to qualify and be able to debt service the mortgage and lines of credit. The banks have tightened their lending guidelines so much that some long-term. clients are not qualifying to purchase a principal residence, refinance or buy a rental property.

Even credit unions that are not federally regulated have implemented the same stress test as the federally regulated institutions. The good news is that we have a couple of lenders that have implemented their own stress test which helps   clients qualify for a bit more. However, it’s only a matter of time before these lenders follow the federal regulated institution stress test.

Fixed interest rates have moved up, and they are still relatively low compared to what interest rates were back in 2005 at 5.35% for 5 years. The variable/adjustable rates have also moved significantly lower and are way below prime. Therefore, people who have prime minus .60% (3.10%) or a higher rate should look at researching whether now might be the time to move to a better rate.

With the tightening of mortgage rules, your credit score and history can have an impact on the interest rate that you get. Missed or late payments stay in your credit report for 7 years, regardless if you have paid off or closed the account. While lenders consider a credit score of 680 or higher a good score, lenders look beyond the credit score when assessing how much you qualify for and the interest rate they will give you.

All in all, the mortgage world is significantly different than it was before. There has been an unprecedented amount of changes in the last few years.


15 Oct

Ask the Expert: Should I prepare myself for higher interest rates?


Posted by: Alisa Aragon-Lloyd

Rates may be at historic lows however, with big banks raising fixed rates and reducing variable-rate discounts, you need to be ready to pay more. As seen in REW.ca

Q: I’m easily able to make payments on my mortgage at the moment as my rate is so low. I saw that the Bank of Canada didn’t cut its overnight rate last week, and that some banks are actually raising interest rates. Should I be prepared for higher interest rates, and if so, what is your advice?

A: Interest rates are still at historical lows, and we ke  ep hearing for years that interest rates are going to rise. If anything, interest rates have dropped.

The Bank of Canada was considering dropping the overnight rate. However, on Wednesday’s announcement they have decided to maintain the overnight rate at 0.5 per cent. Since the Canadian dollar has already fallen sharply and a rate cut could have imprudently triggered a currency rout. There is a great deal of concern about household debt, and another rate cut would add to the risk by encouraging excessive borrowing.

So does this mean that we should stop thinking about rising interest rates? Not at all. It is important to be proactive and prepare yourself for higher interest rates.

The following are some tips that can help you.

  1. Pay down your mortgage faster

To ensure that you don’t over-leverage yourself when interest rates do eventually increase, start by making larger or more frequent payments and make lump-sum prepayments when possible towards your mortgage. This will help you by lowering your principal so you will pay interest on a smaller amount in the future.

  • Consider making a lump-sum payment. Most lenders allow you to pay up to 10 to 20 per cent of your mortgage without a penalty annually. The prepayment amount is applied directly to the principal balance, which will help you save money.
  • Changing your payment frequency is a great way to pay off your mortgage faster. While most people might not have extra money to put a lump-sum payment every year, you can save money by paying the same amount per month and just simply splitting your mortgage payments throughout the month to semi-annual, bi-weekly or weekly payments.

Below is a chart showing how paying more often pays off.

(Calculations based on a mortgage amount of $450,142 with a five-year fixed rate of 2.64% and a 25-year amortization.)

2.Pay down other debt

If you are only making minimum payments on your credit card, it would be a good idea to start paying more. If you are unable to come up with the money to increase your payments, start a budget or see where you can tighten your existing one, cut spending and start paying down your credit card debt with the money you save.

If you are living beyond your means, it won’t get any easier later on. It is better to become proactive, instead of getting in a tighter situation later, especially when interest rates start rising. If you are looking at buying a home, calculate what the payments will be with a higher interest rate and see if you would be comfortable making those payments in the long run. If not, purchase a property of lesser value


If your mortgage is coming up for renewal in the next two to three years, it is worth checking out if you are eligible to refinance now and take advantage of the lower interest rates. Also, if you have equity in your home, this is a great opportunity to pay off some debts and increase your monthly cash flow. Even if you have to pay a penalty for refinancing prior to the end of the term, it could help you save money in the long run. Talk to your mortgage expert

to explore the options and see if it makes sense.

3.Have a contingency fund

If you are concerned about higher interest rates when your mortgage comes up for renewal, start working on it now. It’s a good idea to start a contingency fund that can be used to cover the increase in mortgage payments or use that fund to make a lump sum payment on your mortgage. If you are on a variable mortgage, figure out what would be your mortgage payments if you had a fixed rate and put that extra money aside. By making small changes in your daily spending you can save more money in the long run.

4.Seek professional advice

Having a close relationship and working with your mortgage expert frequently can help offset some of the stress and confusion. Your mortgage expert can help educate you in areas you might not be familiar with and can help you be prepared for when interest rates do start increasing.

If you are worried if you will be able to afford your home when interest rates increase or if you want to find out how you can save money, give me a call at 778.893.0525 to speak about your options.