Benchmark Qualifying Rate

This was one of the new rules the Minister of Finance instated April 19, 2010. The Benchmark qualifying rate is the rate lenders will use to qualify borrowers wanting a variable rate mortgage term or fixed rate mortgage term less than 5 years. Most of the time this only applies when you have less than 20% downpayment when purchasing or are borrowing more than 80% of your homes value in the case of a refinance or renewal . So even though you will get best rates, the lender still wants to ensure you qualify when variable rates rise or if rates are higher when you renew your mortgage. The idea behind the new rule is to ensure borrowers have the capacity to handle higher payments. It has been over a year since the new rule came into effect, and we as mortgage brokers would say it has not had a large impact on borrowers that we have noticed.

The benchmark qualifying rate is always changing, contact your mortgage professional for the recent benchmark rate.

If you have any questions, please do not hesitate to contact Martene Woodward, Mortgage Associate with Argentum Mortgages at 866-932-8412 or info@mortgagegirl.ca

Variable Rate Update

The Prime Rate affecting Variable Rate Mortgages will likely not increase until September. The weak US Economy, the strong Canadian dollar and the effects of the government spending on economic growth in Canada all played a role in the May 31st decision to keep Prime Rate the same. Something they will probably do again for the July 19th meeting.

If we start to see economic growth start to increase in the next coming months, which is predicted to happen, rates will rise.

If the Bank of Canada waits too long to raise rates, potential inflation can could lead to an even steeper rate hike in the future. It is easier to digest a couple of small rate increases than 1 really big one. Therefore, it makes sense for rates to start rising in September.

Prime Rate will likely be about 0.75% higher by the end of the year.

If you have a variable rate mortgage and Prime Rate does change, your payment amount will change as well. The good news is; 71% of Canadians factored a potential mortgage payment hike into their monthly budget. See this article in the Financial Post for more the CMHC annual mortgage survey.

Talk to you existing mortgage lender or a mortgage professional for more information or if you have any questions.


Martene Woodward
Mortgage Associate, Argentum Mortgages
P: 866-932-8412

Pre-Approval Don'ts

DON’T-switch employers or positions

Your pre-approval is based on your current employer, if you change those details, your pre-approval status may change.

DON’T-incur new credit card debt

Your pre-approval is based on your debt balances at the time of application, if you make any changes to those, your maximum purchase price could change. This includes “don’t pay for a year” scenarios.

DON’T-buy a car

You can’t live in your trunk, so don’t buy a new car until you have taken possession of your new house. The car payment will reduce your maximum borrowing power.

DON’T-trust a seller’s opinion on the condition of the property or any recent renovations done

Always confirm the details the seller has told you by obtaining a professional inspection.

DON’T-overlook a property because it needs a little TLC

Some lenders offer an innovative product called a Purchase + Improvements mortgage. This allows you to include the cost of the improvements in your total mortgage amount.

DON’T- make any large deposits into your account without consulting your mortgage professional first

The lender will want to confirm any large deposits into your account that hold the down-payment funds. This is to satisfy the Anti-Money Laundering Law.

Pre-Approval Do's

DO-pay down credit balances

Reducing your debt level is never a bad idea.

DO-use an experienced Realtor; or lawyer in the event of a private sale

You consult a doctor about your health, you consult a mechanic about your car, you should consult a real estate professional about your home purchase.

DO-put a financing condition on the Offer to Purchase

A pre-approval is an approval based on you the borrower and your current financial profile. The lender and insurance company (if applicable) still need to approve the property, specifically the value and condition of it.

DO-start saving up your closing costs

The lender will want to confirm you have cash on hand to cover your closing costs like lawyer fees, property tax adjustments, title insurance etc.

DO-talk to your mortgage professional before making any changes to your financial profile.

We need to know in the event it may change your pre-approval status.

DO-know your payout penalties

Ensure you are aware of the costs involved if you break your term early.

DO- start getting your supporting documents together

This will make the process go faster when you find a property.

Find out how to fix your credit.

Do you know what your credit score is? Your credit score can be the difference in getting a great mortgage rate and not being approved at all. Check out this great info page on what it takes to fix your bad credit.

Fix your credit score

Interest Rate Predictions- If only we had a crystal ball

We saw fixed rates rise across the board over the past month, going up by about 0.1%- 0.4% depending on the lender. These increasing rates also come at a time of growing concern about Canadian’s record debt levels, and just weeks after new mortgage rules were announced. Most economists agree that the upward rate trend will not end any time soon. Chief economist at TD, Craig Alexander, said that the rise in mortgage rates can be linked back to the growing expectations of inflation in the United Stated and strong indicators for U.S. economic growth.

Edmonton Mortgages interest rates are still relatively low by historical standards. The current 5-year fixed rate is still about 1% lower than last April when we saw the debt crisis hit Europe. Economists suggest fixed rates could rise by about 0.65% over the next year. Prime rate will also have to go up eventually and a 1% increase is not an unlikely prediction, so be ready if you have a variable rate mortgage or line of credit. Keep in mind; unexpected events can have an impact on these predictions.

Whether you own a house or are looking to buy, rising mortgage rates affect you directly. If you are looking for a home, you benefit from low rates right now. Options are to buy now to lock in manageable mortgage payments for a while, or risk higher mortgage rates while hoping housing prices will fall. If housing prices do fall, which the Canadian Real Estate Association has projected will happen throughout the country, rates are still going up, which means higher interest costs over the life of your mortgage term. Most economists and real estate professionals I talk to say now is the time to buy, don’t hold off on hope that prices will decrease.

What if you already own your home? You will have to renew your mortgage term eventually. If you took out your mortgage recently, your best bet is to pay as much onto your principal as you can as interest rates could potentially be 3% higher at renewal date than you are paying now. That increase makes a big difference on your mortgage payment, especially since you pay the most amount of interest and the least towards principal in the first 5 years of your mortgage. People further along in paying off their mortgage won’t be hit as hard when rates rise.

When the Finance Minister announced changes to the rules on insured mortgages, the projected impact will essentially have the same effect as rising rates. Both will increase your Edmonton mortgage payment. For example, if you had a $300,000 mortgage with a 4% interest rate, monthly payments would increase by $104 if you had to lower your amortization to 30 years from 35. That is equivalent to a rate increase of 0.56%. Despite these upcoming changes and the predicted rising rates over the year, the housing market is predicted to stay stable, not a big increase and not a big decrease.

If you need an Edmonton Mortgage Edmonton Home Equity Loan or just need Alberta Mortgage Rates please call us and we will answer all your questions.

Mortgage Girl Edmonton

Check our new website with lots of useful information about the Mortgage Rule Changes.
http://www.mortgage-broker-edmonton.com