Mortgage Rates & Mortgage Broker News in Canada

First National Conventional Stated Income

First National rolled out a conventional stated income mortgage last week. It was a soft launch intended to “assess (the) market opportunity,” said a company representative.

The product is aimed at self-employed or contract workers, with good credit and a minimum 3-year credit history.

The product comes in two flavours: 

• Conventional 65:  For purchases, refinances and ports, with a 650 minimum beacon, and 65% LTV up to $750,000 (50% thereafter).
• Conventional 75:  For purchases and ports, with a 720 minimum beacon, and 75% LTV up to $750,000 (50% thereafter).

Other details of note:

• Property Type:  Owner occupied with 1-4 units
• Maximum loan amount:  $1 million
• Term:  1-5, 7 and 10-year fixed and 5-year variable
• Rate hold:  120 days
• GDS/TDS:  32% / 40%
• Down payment:  From own resources; no gifts

The Conventional 65/75 mortgage is available on a trial-run basis for now, and only through approved First National brokers.

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About First National:  First National is the largest non-bank provider of single family residential mortgages in Canada. It currently administers roughly $49 billion of residential and commercial mortgages.

Street Capital Launches New ARM

“No-frills” mortgages have become a tempting option for home buyers with limited pre-payment ability. The newest entrant in this segment is Street Capital’s “Street Sense Closed Adjustable Rate Mortgage” (ARM).

The Street Sense Closed ARM is a highly-discounted, fully-closed variable with minimal pre-payments. The benefit it offers, in exchange for less flexibility, is a lower rate. The Closed ARM’s rate is intended to float about 5-10 basis points below most competitors (most good lenders currently stand at prime – 0.50% to –0.60%).

“The Closed ARM is a mortgage for a client who just wants a rate and really has no intention of refinancing their property,” said Street Capital President, Paul Grewal.

"This product is not meant for everyone. We wanted to test the market and expand our product offering to pick up additional volume."

More details on the Closed ARM:

• Term:  3-year or 5-year variable rate
• Early Exit:  None. No refinance or early payout is allowed unless there is a bona fide sale of the property.
• Pre-payment Penalty:  3-months interest plus discharge administration fee
• Lump-sum Pre-payment Option:  None
• Annual Payment Increase Option:  10%
• Portable:  Yes, upon qualification
• Rate hold:  None. Rate set 5 days before closing
• Switches:  Yes. No legal or appraisal fees if a CMHC-insured switch
• Available on Rentals?  Yes; up to 80% LTV 
• Minimum Beacon: 600
• Maximum mortgage:  $1,500,000
• Available Amortizations:  16 - 35 years
• Conversion to Fixed?  Yes. May be converted into a fully-closed fixed mortgage (equal to or greater than the remaining ARM term) at any time without penalty

Certain conditions apply. Contact a Street Capital-approved mortgage planner for rate and product information and to determine suitability.

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About Street Capital:  Street Capital Financial Corporation is a Canadian wholesale lending company. The company has approved lender status with Canada Mortgage and Housing Corporation (CMHC) and distributes through the mortgage broker origination channel.

LBC Homeowner Kit Now Available Nationwide

We’ve been waiting for this announcement for a long time. Laurentian Bank of Canada’s (LBC’s) Homeowner Kit is now available everywhere LBC lends.

Prior to last week, it could be had only in Quebec (since 2006) and Ontario (since 2008).  Now borrowers in BC, Alberta, Nova Scotia and other provinces are eligible too.

The Homeowner Kit is a low-cost hybrid mortgage and line of credit all in one. It includes:

• One to three mortgage terms (these can be 1- to 10-year fixed terms, or 3- or 5-year variable-rate terms)
• One to three separate lines of credit (LOCs)

The LOCs are manually readvanceable. That means you can call LBC up to four times a year to increase your available credit after you make principal payments on your mortgage portion(s). 

LBC plans to make the Homeowner Kit automatically readvanceable in the future—which would then make it suitable for things like the Smith Manoeuvre.

More details:

• Maximum LTV:  80% (65% if stated income)
• Property Type:  Owner-occupied principal residences
• Minimum Beacon: 650
• Maximum Loan:  $750,000 ($350,000 if stated income)
• Maximum Debt Ratios: 30% GDS / 38% TDS 
• Qualified Using:  The prescribed rate and a 25-year amortization 
• Maximum Amortization: 35 years on mortgage portions
• LOC Payments: Interest-only, fixed sum or percentage of balance
• Mortgage Prepayments (Lum-Sum): 15% annually
• Mortgage Payment Increase: 15% annually + double-up
• LOC Prepayments: 100% any time (i.e., it’s fully open)
• Online Access:  Yes
• LOC Debit Card: Yes

The Homeowners Kit’s main advantages are:

• Rate (LBC’s mortgage rates are among the best around)
• Hybrid ability (for people who need interest rate diversification)
• Multiple lines of credit (for tracking interest separately on different types of borrowing)
• Fixed payments on variable-rate terms (helpful for budgeting purposes because LBC’s variable-rate payment will not change if prime rate rises)

LBC’s Homeowner Kit is one of the most competitive hybrid mortgages there is. Once it gets an automatically readvanceable LOC, it’ll also be one of the top readvanceable mortgages.

The RBC RateCapper Mortgage

68% of Canadians choose fixed-rate mortgages. Yet, most people would consider a variable-rate mortgage…if it weren’t for the darned payment risk.

RBC feels it has an ideal solution.  It’s called the RateCapper mortgage.

"RateCapper gives homeowners the best of both worlds,” says Marcia Moffat, VP, home equity financing.  “They can take advantage of a low prime rate, while at the same time locking in a guarantee they will never pay more than the 'capped rate' over the term of the mortgage, no matter how much the prime rate may rise."

That “capped rate” is 5.85% at the moment.  However, RateCapper borrowers start off by paying just 2.25%.  Therefore, 3.60% is the most their rate can go up.

RBC has offered the RateCapper before. It originally launched way back in 1993.  Moffat says it came out of hibernation because RBC has “seen increased demand for mortgage options that provide additional rate protection."

RBC executive, Anjel Van Damme, told FP’s Garry Marr today:  “It's the best product in a rising-rate environment for consumers who can't choose between fixed and variable.” (FP Story)

Claims like these always pique our interest, so we ran a few numbers.

First off, it’s worth noting that prime rate has averaged 4.81% over the last 10 years, and 5.85% since 1991.  1991 is when the Bank of Canada started inflation targeting and knocking down long-term interest rates.

If you assume that prime will jump back to its 1991-2010 average (not our prediction, just an assumption), it would take a 3.60 percentage point jump to get there from today’s rate. 

So let’s assume prime goes up even more than that:  four full percentage points.

That would take prime rate from 2.25% today to 6.25% by July 2012.

In that case, a regular prime - .50% variable would still be cheaper over five years than the RateCapper, by over $1,300 per $100,000 of mortgage.

Keep in mind, a 4% hike is well above the forecasts of most economists.  If you really believe rates could go that high, a long-term fixed rate is a better bet. Given the same 4% rate hike assumption, a 4.35% five-year fixed--for example--would save you over $3,700 per $100,000 of mortgage, compared to the RateCapper.

If you want yet another alternative, consider a hybrid mortgage.  Hybrids are part fixed rate and part variable rate.  They’re meant to diversify your interest rate exposure—meaning they give you a chance to save interest while covering part of your backside.

As for the RateCapper, it’s a great idea at first glance. But in our view, RBC has set it’s 5.85% cap too high to be mathematically compelling.
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More on the above analysis…

All scenarios above are hypothetical and approximate and assume a 25-year amortization, a 5-year term, and a 1/4 point rate increase at each BoC meeting starting this July (until rates rise 4%).

In reality, the BoC will likely pause its rate hikes at some point, and/or occasionally hike in increments other than 1/4 point.  Nonetheless, a linear 1/4-point-per-meeting rate hike assumption is reasonable for modeling purposes and doesn't invalidate the conclusions.

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As always, speak with a mortgage professional to confirm which mortgage options make the most sense for you.

ICICI Enters The Broker Channel

Homeowners will be hearing more of the name ICICI Bank. The company is now distributing mortgages through mortgage planners, at budget rates. The move will undoubtedly give its volume a healthy boost.

ICICI Bank Canada began its broker pilot in February and had its full-scale launch on Monday. The company says its strategy is to offer “best-in-class mortgage rates to the broker channel” and an “aggressive compensation structure to provide incentive to brokers.”

For a full-featured mortgage, its rate sheet delivers. But as brokers know, new lenders often come to market with great rates to create buzz, and then fade off into the horizon. So we’ll be watching ICICI to see if its rates remains as competitive as it is today. If so, non-status brokers will have another “go-to” lender.

From a features standpoint, ICICI mortgages have good standard equipment, including:  portability, assumability, 20%/20% pre-payment privileges each calendar year, and 120-day rate holds on purchases (90 days for switches/refinances).

ICICI niceties:

• For a limited time, ICICI is paying legal fees on both switches and refinances! (Usually, legals are only covered on switches; BC and Ontario only)
• ICICI has 120-day pre-approvals on all of its terms (its quick close has a 30-day rate hold)
• It allows pre-payments on any normal payment date. (Some lenders allow only one-lump-sum pre-payment a year--which is sooo annoying).
• ICICI pledges a 24-hour turnaround time on underwriting. (Brokers will tell you that’s a promise ICICI will have to earn. Brokers have become totally jaded by service guarantees lately. As the recent application rush proved, many lender’s SLAs don’t mean a hill of beans.)

Other things to know:

• At this point, ICICI is only offering high-ratio residential mortgages insured by CMHC. On a conventional mortgage, the client has to pay the CMHC premium. (Most lenders don’t charge a premium on LTVs <= 80%, and ICICI will probably eliminate this premium as well, once it adds a conventional mortgage lineup. There’s no timeline on that, however.)
• ICICI’s variable-rate mortgage is convertible only after the first 6 months. (This is somewhat unusual but it’s not an issue if you plan to ride your variable out.)
• If you’re a broker, expect ICICI to announce its volume bonus structure soon. Thankfully, we hear it will be based on firm-wide volume as opposed to individual broker volume.
• ICICI also finances rentals, subject to CMHC guidelines

Once ICICI Bank has a wider presence in the broker channel, it says it, “intends to supplement its product offering to mortgage brokers with add-on products…such as home equity lines of credit.”

About ICICI Bank Canada

ICICI Bank Canada is a full-service direct bank with an asset base of about C$ 5.8 billion. ICICI  Bank Canada is a wholly-owned subsidiary of ICICI Bank Limited, which has its headquarters in Mumbai, India. ICICI Bank Limited is India's largest private sector bank as measured by asset base, and the second largest bank in the country with consolidated total assets of about US $103 billion. All figures as of December 31, 2009.

ScoreMaker

If somebody told you how to increase your credit score 50 points, would you be interested? 

True Business Solutions is hoping you will be. It’s got a new product called ScoreMaker that provides personalized step-by-step instructions on how to boost your credit score. 

Higher credit scores can come in handy, especially when you’re applying for a mortgage.  In many cases, a better score will be the difference between you qualifying for a mortgage at a good interest rate, or qualifying period.

ScoreMaker works like this:

1. Your mortgage broker pulls your credit report
2. ScoreMaker analyzes the report data in seconds
3. ScoreMaker tabulates the amount by which your score can be improved
4. You decide if the potential score increase is sufficient before buying the report
5. If you purchase the report, ScoreMaker outlines a series of specific steps you can take to improve your score.

ScoreMaker makes two types of suggestions:

Short-term score enhancement recommendations (which take effect in 45 days or less)

Long-term score enhancement recommendations.

Recommendations involve things like paying down debts by specified amounts, resolving credit disputes, utilizing dormant accounts, and removing old or inaccurate items from your bureau.

The product’s scoring recommendations have been derived from thousands of backtests of actual credit report data.  In fact, ScoreMaker claims their scoring algorithms are 94% accurate (meaning they closely correspond to Equifax’s Beacon score model).

In the weeks ahead, ScoreMaker will be rolling out two big improvements:

1. A simulator that tells you how to get a particular score in the cheapest possible way.
2. An online interface to make ScoreMaker more accessible (presently it’s only available to MorWeb users)

A customized client report costs $49.95, which is a pittance if its suggestions help you qualify for a mortgage, or get a better rate.

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For more information, see:  ScoreMaker

BMO’s Drops The Gauntlet With Their 5-Year Fixed Mortgage

It’s rare to see a big bank undercut its mortgage competitors so publicly.

Most of the time they do it stealthily with “discretionary rates” that are only offered to the bank’s best customers.

Not this time.  BMO has declared war with a new 3.75% five-year fixed rate.

The other big banks are advertising 4.09% for their “special offer” rates. BMO’s promo, however, is 0.34 percentage points lower, and a juicy 1.64% off posted rates! 

The move is a clear play for market share and it will, no doubt, shake other banks in their boots.  If other lenders match, it will leave them with just a 121 basis point spread above 5-year bond yields. That’s uncomfortably below the 135 bps minimum they usually like to see.

The main terms of BMO’s special are as follows:

• Maximum Amortization:  25 years
• Rate Hold:  Up to 90 days
• Pre-Approvals:  Allowed
• Lump-sum Pre-payments:  10% maximum per year (1/2 of the 20% that BMO normally allows)
• Optional Payment increase:  10% maximum per year (again, 1/2 of the 20% that BMO normally allows)
• Term:  Fully closed unless you sell the property, refinance, or early renew into another BMO mortgage.
• BMO Mortgage Cash Account:  Not available
• BMO Skip-a-Payment:  Not available

Some will view BMO’s 25-year amortization limit as a PR play to show that BMO encourages responsible borrowing. However you want to spin it, it never hurts to encourage less leverage among consumers.

It’s also interesting that BMO has cut its pre-payment privileges in half with this promotion.  This promo is the closest a Big 5 lender has come to a “no-frills” mortgage in quite a while.

BMO’s move is not only an attack on other lenders, but it’s a direct assault on brokers.  Most brokers generally offer 3.79% for a 5-year fixed with a 90-day rate hold. That said, certain high volume brokers with lender status are quoting rates under 3.75% for 90-day closes, and below 3.70% for 30-day closes.

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Sidebar:  In its press release, BMO said it recently polled Canadians and found:

• “Nearly 70 per cent of current home owners are looking to pay down their mortgage sooner.”
• “74 per cent of Canadians looking to purchase their first home are considering an amortization of 25 years or less.”

Home Trust’s New 1-Year Variable

Most mortgage shoppers are still in love with fixed rates, but many have been licking their chops with variable rates near 2%.

That’s driving new interest in short-term variable mortgages. Just last Thursday, Home Trust became the 2nd lender in eight days to unveil a one-year variable-rate product. (Street Capital launched its on January 20.)

Armando Diseri, Home Trust’s VP of Mortgage Lending for its Accelerator Products, says: “We noticed that there has been an increased demand for shorter-term mortgages because some people think that rates have not bottomed out.”

“In order to satisfy this demand and give our brokers and consumers more options, we felt introducing the 1- and 3-year Variable Rate Mortgage was the sensible thing to do.”

One-year terms offer variable-rate fans the chance to renew into potentially fatter variable-rate discounts in one year, as opposed to waiting to renew a 3- to 5-year term.

Of course, if you plan to convert your new variable mortgage to a fixed rate within 11 months (you can do that at no cost), then a lower variable rate and better conversion rate are more important than the term you pick.

For those familiar with Home’s products, its new 1-year term has the same features and guidelines as its 5-year variable, with one exception. Unlike Street Capital, Home Trust passes the default insurance premium through to borrowers on its conventional one-year variable. These premiums range from 0.50% to 1.00% of the principle amount, depending on loan-to-value.

Home Trust and Street Capital have other important differences too, like rate structure, pre-payment policies, and broker incentives. Talk to a mortgage planner if you’re curious about them.

Concentra’s Vision Mortgage Returns

Concentra Financial has re-launched its subprime “Vision Mortgage.”

Prior to Tuesday, it was off the market since December 2008.

“Our decision to temporarily suspend the program was in response to the economic conditions at the time and risk management practices needed to reduce credit risks,” said Jane Kulbida, AVP Residential Mortgages at Concentra.

“Market conditions have since improved and appear to be stabilized. Concentra is emerging from the economic crisis in a very strong position and we are, therefore, able to expand our credit risk tolerances to once again include this important program.”

Here are some of the Vision Mortgage’s lending guidelines…

• Maximum LTV:  75% (Purchases) and 65% (Refinances). A sliding scale applies.
• Terms:  1-5 year closed. No variables.
• Amortization:  25 years maximum
• Income:  Must be verified. No stated income.
• Minimum Beacon:  540 (Concentra also uses their own “internal” scoring model)
• Debt Ratios:  45% maximum TDS
• Derogatories:  Ex-bankrupts allowed with 1-year discharge and re-established credit. No outstanding consumer proposals.
• Property:  No apartment condos, rentals, recreational, or acreage allowed.
• Fee:  1% (This is the same standard fee Concentra charged in the past)
• Lending Area:  All provinces except Quebec

In terms of a target market, Kulbida says, “I think this product will serve many clients. Particularly those that have satisfactorily explained credit issues and need assistance getting their financial affairs back in order.”

“We allow a Total Debt Service ratio up to 45% and the interest rates are reasonable.  This is a true sub-prime product, not an Alt. A product.”

Street Capital Launches 1-year Variable

Street Capital has rolled out the first nationally available 1-year adjustable rate mortgage.

Paul Grewal, President of Street Capital, says the product is well-suited to those who expect that “discounts on ARM’s will increase.” It gives people “the flexibility to choose a shorter ARM term,” he adds.

Therefore, if you think variable rates will be prime – 0.50% next year, for example, this 1-year variable lets you switch mortgages in 12 months without penalty--instead of waiting 3-5 years.

Street Capital also lets customers convert to a 3-, 4- or 5-year fixed rate at any time, with no fee, and at discounted broker rates.

From a strategic standpoint, it’s a great move by Street.  The 1-year term has a clear value proposition in the current market.  More importantly, it gets customers in the door—many of which will renew with Street in a year, or lock into a long-term fixed rate.

Here are some of the key guidelines:

• LTV: Up to 95% on purchases and 90% on refinances
• Rate Hold:  60 days
• Amortizations:  16-35 years
• Compounded:  Semi-annually
• Loan Amounts:  $50,000 to $1,500,000
• Qualifying Rate:  3-year discounted rate or contract rate
• Minimum Beacon Score:  600
• Early Termination Penalty:  3 months of interest
• Lump-sum Pre-payments:  20% annually
• Payment Increase Option:  20% annually

Rate premiums apply on conventional mortgages between 75%-80% LTV, rentals, stated income deals, and discharged bankrupts.

In conjunction with today’s announcement, Street Capital also announced a new 3-year variable.

Prime – 0.25%

Merix has just raised the bar (or lowered it, as the case may be).

They’ve just announced a prime – 0.25% variable-rate offer on a 3-year variable.  It’s the lowest nationally-advertised variable rate in over a year.

The details:

• Must close within 30 days
• Purchases and refinances only
• No pre-approvals or switches
• Owner occupied single family dwellings only
• Minimum Beacon Score: 680
• Minimum Amortization: 10 years
• Minimum Mortgage Amount: $100,000

Speak with any Merix-approved mortgage planner for complete rules and conditions…

ING’s Rate Holds Are A Hit

Back in September, we took a look at ING Direct's new broker rate hold technology.  It’s essentially an instant way to lock in a rate by providing the client’s name, email, phone number, and mortgage amount.

ING’s broker rate holds have been incredibly popular, with over 3,000 rate holds submitted since August.

ING also allows the general public to get their own rate holds (via this web page).  Rate holds for retail customers launched last March, on a pilot basis.

ING is currently the only lender in Canada that lets clients get their own rate holds online--without speaking to anyone.  Since ING “owns” this market, it’s an absolutely brilliant strategy.  There is currently no easier way to protect yourself from rising rates while you shop around for the best mortgage deal.

One big problem with pre-approvals, however, is adverse selection. Adverse selection is a situation where the lender is disadvantaged because customers tend to close pre-approvals only if rates go up.  But Martin Beaudry, Vice President, Retail Lending at ING DIRECT (pictured on the left) says it’s a tolerable tradeoff.  “We have a good handle on the conversion of Rate Holds to real applications,” he says.

Martin notes that ING also has good control over hedging costs—which are another big concern of lenders who offer pre-approvals and rate holds.  He says, “ING DIRECT has a very robust risk management process that includes a number of hedging strategies.”

Here are a few other miscellaneous “did-you-knows” about ING rate holds:

• Clients can have only one rate hold at one time, but they can be reset any time by calling ING.
• Resetting a rate hold starts the 120-day rate guarantee period all over again. The client then receives a new guarantee based on the rate available that day.
• New rate holds can be requested when old ones expire.
• If a homeowner gets his or her own rate hold, he or she can still do business with a broker. The broker simply needs to refer to the client’s rate hold confirmation number in the broker’s application.

It’s important to remember that rate holds do NOT assure you of getting approved for a mortgage.  All they do is hold a rate.  Therefore, if you have any questions about your ability to qualify, the best bet is to first talk with a mortgage planner and have him or her pre-qualify you.

AGF Trust’s New Simple Mortgage

After years of serving the alternative lending market, AGF Trust has charged into the high-ratio insured mortgage business--with the launch of its “Simple Mortgage.” 

The Simple Mortgage rolled out on October 14. It’s designed to be a full-featured mortgage at no-frills rates (currently under 4% on a 5-year fixed).  This is a first for AGF as it's never offered fully-discounted insured mortgages before. 

All Simple Mortgages are CMHC insured.  Interestingly, unlike most new insured products, AGF’s Simple Mortgage is not securitized (resold to investors).  Instead, the company says “AGF Trust is currently well capitalized and will hold these mortgages on the balance sheet.”  The company says it views insured mortgages as “an attractive asset class.”

Besides solid rates, AGF cites its primary advantages as being: 

• A longer rate hold than its no-frills competitors (60 days vs. 30 days)
• More flexible payment and pre-payment options. 

AGF also has an opportunity to impress with service, given the subpar turnaround times at many lenders nowadays.  (Hopefully AGF has plenty of underwriters on staff to come through on this promise.)

The company says it chose the name “Simple Mortgage” because its mortgage underwriting criteria are “standard, traditional, and basic.”  AGF says there is nothing "grey" about this mortgage in terms of qualifying.  The goal is to make qualifying “simple black and white.”

Here are the main product details…

• Rate hold:  60 days
• Minimum Credit Score:  620 (600 for co-borrowers)
• Income:  Verifiable only (no stated income)
• GDS/TDS:  35%/42% (up to 44% with a 680+ Beacon)
• Lending area:  Ontario (other provinces may come later)
• Maximum Mortgage:  $750K in GTA; $500K elsewhere
• Minimum Mortgage:  $100K
• Maximum LTV:  95%
• Switches:  No (Clients must refinance)
• Pre-approvals:  No
• Gifted / Borrowed Down Payments:  Yes / No
• Lump sum pre-payment option:  20% annual (on any payment date)
• Payment increase option:  20% annually
• Early termination penalty:  Greater of 3-months interest or IRD
• Amortization:  Up to 35 years

Other considerations:

• Properties should be 1-2 units in “readily marketable in urban locations” (no well or septic)
• Owner-occupied properties only
• AGF’s IRD penalty is based on bond yields.  (We’ve requested the calculation method and will advise.)
• A good established credit history is essential

The Simple Mortgage is a solid new entrant in a crowded field.  However, if AGF stays true to its rate promise, it may have a winner.

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For complete details, contact any AGF Trust-approved mortgage planner.

The Merix HELOC Is Back

There’s a new readvanceable mortgage in town.  After an 11-month hiatus, Merix Financial has re-launched its HELOC. 

Compared to Merix’s previous iteration, this version is somewhat unique.  For instance:

• You can have up to a three components:  a 5-year fixed, a 5-year variable and/or a line of credit (LOC).  If you like, your mortgage can be split among these segments.
• You can lock in $25,000 portions of the LOC to a fixed or variable rate at any time.
• Unlike most lender’s HELOCs, this one is fully insured (so Merix can securitize it)
• The entire mortgage--including the LOC—is portable (a nice feature not found in many readvanceables).
• Since it’s insured, TDS can go up to 44% with a 680 Beacon

Merix’s HELOC is also unique in that it has a defined term (5-years).  Most open HELOCs don’t have terms.  Merix says it needed to make it a 5-year product because it’s easier to securitize.

The trade-off of this is the penalty.  If you break it before five years, Merix charges 3-months interest or IRD or an administration fee—whichever is greater (IRD applies only to fixed portions).  The administration fee equals .025% of the total authorized loan amount times the number of months remaining.

The penalty applies even if the entire mortgage resides in the LOC portion—which is unusual.  This is attributed to the considerable fees lenders must pay to set up HELOCs in the Canada Mortgage Bond program.

On the upside, the HELOC is fully and automatically readvanceable.  In other words, as soon as you make a mortgage payment (or pre-payment), your available line of credit increases instantly and proportionately.

Some more details…

• Minimum Beacon:  680 (650 for secondary applicants)
• GDS/TDS:  35%/42% (up to 44%)
• Term:  5 years
• Maximum LTV:  80% (0.15% higher rates apply above 75%)
• Mortgage Types:  Owner occupied, 2nd homes, rental (1-4 units), and BFS
• LOC Sub-accounts:  One
• Qualification Rate:  3-year fixed rate or contract rate
• Prepayment Options: 
• Fees:  $5 per month
• Maximum Amortization:  25 years
• Pre-Approvals:  Not available
• Down Payment:  Must be from own resources
• Maximum Loan:  $1 million (or more if customer pays the insurance premium)

Our wish list for this product is relatively short:

1. Multiple sub accounts (a la National Bank’s All-in-One, Scotia’s STEP, BMO’s Readiline, etc… Multiple LOC accounts are handy for segregating personal and investment borrowing.)
2. Online account access and funds transfers (Currently, you need to fax or email LOC withdrawal requests.)
3. No penalty for breaking if the mortgage is entirely in the LOC portion (That said, Merix notes that its HELOC is not intended for short-term financing options.)

All in all, it’s great to have Merix back in the HELOC game.  Its new HELOC has some positive traits and is definitely worth a look.

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Please note:  Other details may apply. Speak with a Merix-approved mortgage planner for complete information.

Home Trust Builder Program

Home Trust recently re-launched its conventional Builder Program. 

The program is designed (among other things) to help people finance the construction of a new home.

Here are a few of the details:

• The Builder Program is conventional financing. Therefore, you’ll need a sufficient down payment, as per below.
• Home Trust finances up to 65% of the total cost of a project, on an as-completed basis (i.e.,  Home will lend up to 65% of what the house will be worth after construction is completed.)
• Home Trust advances up to 75% of the land (lot) cost as a first draw
• The next three draws are typically 40%, 70%, and 97% minus the typical ~10% lien holdback
• Builders must have a good track record and be Tarion-approved (no self-builds allowed)
• The property must receive a Tarion Warranty
• The program is limited to major urban centers in Ontario

President, Nick Kyprianou, says Home is doing a lot of infill projects as well as new builds.  This makes the product a potential solution for people who plan to buy a home, tear it down, and put up a new one.

Incidentally, Home had a builder program before, but it wasn’t highly publicized.

Detailed guidelines are not presently available because Home Trust treats each deal on a case-by-case basis.  Speak with a Home Trust approved mortgage planner for complete details.

First To Prime. Winner: ResMor

ResMor Trust just announced prime rate on its 4-year variable mortgage.  This is now the lowest, widely-available variable rate in the marketplace.

It’s been about 10 months since lenders last advertised prime rate on a variable.

Thanks to the credit crisis last fall, variable rates soared to prime + 1.50% or more—after being as low as prime – 1% in 2008. 

Since the spring, however, rates have slowly drifted back towards prime as risk premiums in the money market have subsided.

ResMor’s offer is good until Sept. 30, and the mortgage must close within 45 days of approval.

Contact any ResMor-approved mortgage planner for complete details.

HELOC Deal

National Bank already has one of the top readvanceable mortgages in Canada.  Now it’s better.

NBC has cut its line of credit (LOC) rate down to prime + 0.85% (3.10% as of today).  This is the lowest fully-open LOC rate that we’re aware of.

If you add a 4, 5, 6, 7, or 10-year fixed portion, or a variable-rate portion, you can get the AIO LOC rate even lower--to prime + 0.75%.  (The AIO can be split into multiple portions.)

National is the 2nd bank that’s reduced its HELOC rate below prime + 1%.  That’s good to see.  Hopefully it inspires other lenders to price their LOCs more competitively.

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Sidebar: Here are additional details on the All-in-One.  For more information, contact a mortgage planner near you.

Last Minute Deal in AB

Fixed rates at several lenders are going up, effective tomorrow. 

If you happen to be in Alberta and are looking for a last minute deal, ATB is still offering 3.50% on its 5-year fixed Extreme Discount Mortgage.  It comes with 20% lump-sum prepayment privileges (pre-payments can be made any time during the calendar year) and 20% annual payment increase options.

Home Trust Launches Variable

With short-term capital costs improving, variable-rate mortgages have been coming to market at better rates. 

That, and the BoC’s pledge to keep rates low for a year, have been fostering interest in variables.

Not coincidentally, Home Trust has just unveiled a new variable-rate mortgage of its own.  It’s called the Variable Rate Accelerator, and it’s the company’s first-ever adjustable-rate product.

Home Trust says brokers have been asking it for a variable for some time.  Home Trust president, Nick Kyprianou, says this new product is a direct result of that demand, and notes that Home Trust “will continue to deliver products to satisfy the broker community.”

Below is a brief overview of the Variable Rate Accelerator and its specifications:

• Term:  5 years.  It is fully closed for first three years; and open thereafter on 3 months’ interest penalty or IRD
• Max. LTV:  95% (purchases); 90% (ON refinances); 85% (BC, AB, QC refinances)
• Rate Based On:  RBC Prime; adjusted on the 1st of each month
• Convertible To:  A 3- or 5-year fixed rate (based on the borrower’s remaining term)
• Pre-payment Options:  20% lump sum annually, and/or 20% payment increase annually
• Pre-payments Are Made On:  The anniversary date
• Maximum Loan:  $750,000 or case-by-case
• Maximum Amortization:  35 year
• Portability:  Yes; a fee applies
• Compounds:  Semi-annually
• Available Insurers:  AIG and CMHC
• Appraisals:  Usually no cost, unless requested by insurer

Our take:

• Home’s current rate is prime + 0.50% (2.75% as of today), which is well below the Big 5’s advertised rate of prime + 0.80%.
• It’s also nice that AIG is offered as an option for insured mortgages
• Unlike some lenders, who stick you with a garbage conversion rate, Home Trust offers customers its best broker rates when locking into a fixed term.
• Home says it will continue to aim for fast turnaround times on underwriting this product. (Certain lenders have let their turnaround times severely deteriorate so good service is not something to be taken for granted anymore.)
• With the initial three years being fully closed, you’ll want to make sure you don’t need to get out of this mortgage early.
• Attaching an IRD penalty to a variable-rate mortgage is not common, and we’re a little sketchy on how it will be calculated.  Home Trust says it often waives part or all of the penalty, however, for existing customers who wish to refinance with Home Trust.[Since this story was initially published, Home Trust has eliminated its IRD penalty on this mortgage. The penalty is now a more common 3-month's interest.]
• As with its other Accelerator mortgages, Home offers its “Bring It Home” broker loyalty program on this product as well.

For more information, speak with any Home Trust approved mortgage planner.

The Merix 50/50 “Wise” Mortgage

Hybrid mortgages (those that are part fixed and part variable) are something most people don’t think much about. 

Maybe more should…especially in this low-rate environment where going 100% variable is not as easy a decision as it used to be. 

There are experts out there who also think hybrids are a great idea.  Dr. Moshe Milevsky, Canada’s most quoted mortgage researcher, has told us in the past that “People should strongly consider mortgages that are part fixed and part floating.”

The reasons are two-fold:  1) Virtually no one can predict interest rates long-term; and, 2) Hybrid mortgages offer interest rate diversification—which can reduce risk.

Knowing this, Merix Financial has launched a brand new hybrid called the 50/50 “Wise” Mortgage.  It lets borrowers lock in 1/2 of their mortgage at a 5-year fixed rate and 1/2 at a 5-year variable rate.  The effective combined rate is 3.38% as of today.

The product is suited to a variety of borrowers including:

• People who would normally go fully variable but are afraid prime rate is at its bottom.
• Those who aren’t comfortable being locked into a fully fixed rate.
• Those who can’t decide between a fixed or variable mortgage.

Each portion of Merix’s 50/50 mortgage operates independently, like two separate mortgages.  Yet, the product is registered as only one charge. 

It comes with:

• 20% annual lump-sum pre-payment privileges
• 20% annual payment increase ability
• Portability
• The option to lock in the variable-rate portion at any time
• A 120-day rate hold on purchases (60 days on refinances)
• Up to a 35-year amortization (the minimum is 20 years)

No switches/transfers are permitted (people at other lenders must refinance if they want it) and there are no pre-approvals.

A minimum credit score of 620-650 applies, as do other conditions.  Speak with any Merix-approved mortgage planner for more information.