Selling your
current home and moving into a new one can be stressful enough, let alone
worrying about your current mortgage and whether you’re able to carry it over
to your new home.
Porting enables you
to move to another property without having to lose your existing interest
rate, mortgage balance and term. And, better yet, the ability to port also
saves you money by avoiding early discharge penalties.
It’s important to
note, however, that not all mortgages are portable. When it comes to
fixed-rate mortgage products, you usually have a portability option. Lenders
often use a “blended” system where your current mortgage rate stays the same
on the mortgage amount ported over to the new property and the new balance is
calculated using the current interest rate.
With variable-rate
mortgages, on the other hand, porting is usually not available. As such, upon
breaking your existing mortgage, a three-month interest penalty will be
charged. This charge may or may not be reimbursed with your new mortgage.
Porting conditions
While porting
typically ensures no penalty will be
charged when you sell your existing property and buy a new one, some
conditions that may apply include:
• Some lenders allow you to port your
mortgage, but your sale and purchase have to happen on the same day. Other
lenders offer a week to do this, some a month, and others up to three months.
• Some lenders don’t allow a changed
term or force you into a longer term as part of agreeing to port your
mortgage.
• Some lenders will, in fact,
reimburse your entire penalty whether you’re a fixed or variable borrower if
you simply get a new mortgage with the same lender – replacing the one being
discharged. Additionally, some lenders will even allow you to move into a
brand new term of your choice and start fresh.
• There are instances where it’s
better to pay a penalty at the time of selling and get into a new term at a
brand new rate that could save back your penalty over the course of the new
term.
As always, if you
have any questions about mortgage portability or your mortgage in general,
I’m here to help!
Give me a call with any question at 905-357-5366 or toll free 877-3575366
Michael Distefano
Mortgage Agent
Dominion Lending Centres BTB Mortgage Solutions
4849 Jepson St Niagara Falls On L2E 1J9
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Tuesday 1 October 2013
The Importance of Portability
Tuesday 16 April 2013
Free DLC BTB Mortgage Solutions Hockey Pool
Welcome to our FREE Playoff Hockey Pool
Play the Dominion Lending Centres Free Playoff Hockey Pool for your chance to win a share of over $27,000 in cash and prizes! And, yes, it's FREE; register now and get in the game. Then, pick your own fantasy hockey lineup before each of the first three rounds of the playoffs. If you know your hockey (and a bit of luck never hurts), you could walk away with $10,000 in cash!Enter your picks
We've split up the playoffs into three Segments; Round 1, Round 2 and Rounds 3 and 4 combined. Each Segment, the challenge is to choose an 11 player lineup that will score the most fantasy points during that Segment according to the contest scoring system.Here's the scoop on choosing your 11 player fantasy team:
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- Check the Consensus Picks to see which players are the most popular and the Player Stats to see who's hot and who's not throughout the playoffs.
- Get personal email with your performance summary after each segment and a reminder to make your picks before each deadline.
The psychology of buying a home: Why do we love one place and not another?
You’d buy a sweater on impulse, but when it comes to buying a home it’s all about calm deliberation, right? You might be surprised.
Price, square footage, location: “All that can be trumped by the visceral reaction of seeing a home,” says June Cotte, who teaches marketing at University of Western Ontario’s Ivey School of Business.
“Smells, colours, sounds you can hear inside or from the outside — you might not be aware of them, but they can have an influence.”
The layout may even subliminally remind you of the home of a former boyfriend, Ms. Cotte says. That can have a positive or negative emotional impact on how you perceive a home.
In fact, a study published in the Journal of Advertising Research in 2002 said emotions can be twice as important as knowledge in consumer buying decisions. Subsequent research has determined that the role of emotion in buying situations varies by individual and circumstance, but there’s no doubt that, overall, it’s a critical factor in consumer behaviour.
And while it’s important to feel an emotional tie to the place you live in (it can inspire everything from maintaining the house properly to caring about your community), abandoning your inner Mr. Spock and his logic isn’t wise.
Take aspiration, for example. We judge a potential purchase in part by whether we think it will represent what we would like to be and how we’d like to be perceived. An empty nester, however, might actually be happier staying in peaceful suburbia instead of buying a loft in a noisy downtown area just because he fancies himself a young-again urban hipster.
As well, we fall victim to confirmation bias, the pervasive tendency to cherry-pick or interpret information that confirms our preconceptions. We fall in love with a house and so we dismiss the mouldy smell, saying the place just needs a little airing out.
We also readily become invested psychologically in a property before we’ve reached a rational decision, according to professor Michael J. Seiler, who specializes in behavioural real estate at Old Dominion University in Norfolk, Va.
“You’re looking at a house and suddenly start thinking of the community, and the neighbours, and how they’ll be your friends.
“Expectations, fears, desire for status — a lot of stuff influences you,” he says. “So be cautious, try to be rational.”
Influences are at work before you ever enter a prospective home. Billboard, newspaper and other advertising fosters expectations, Ms. Cotte says.
If a builder advertises extensively, for example, you might make the illogical assumption that because the company spends oodles of money on advertising, it must be profitable, so it must be good. “It’s called accessibility bias,” she says. “The most accessible brands, the ones that immediately come to mind, we value as being positive.”
Matthew Sachs, general manager for Ottawa builder Urbandale, says when advertising, “you hook with emotion and reel in with intellect.” A radio ad, for example, might ask, “Remember the first time you fell in love?” It would then segue from romantic love to love of a house, tack on some factual benefits — energy efficiency for example, although Mr. Sachs says that might be couched as “comfort” or “you’ll save money” — and exit with another emotional hook.
When it comes to face-to-face sales, Mr. Sachs says Urbandale has no defined strategy except to listen closely to what the prospective buyer wants.
His advice to home hunters: “Excitement is important if you’re buying a house, but do your research. Validate and verify.”
Eric Manherz, a Royal LePage real estate broker in Ottawa, says a good agent will help clients keep emotions in check and concentrate on finding what it is they really want. That, he says, takes time and may not be what the buyers had originally thought.
He also sees peer pressure at work. “People at coffee break say, ‘You should never offer full price.’ In some cases, you should. And maybe those people bought years ago, when the market was different.”
Because having too many choices often leads to inaction, Mr. Manherz says that, after a day of house hunting, it’s a good idea to scratch most of what you’ve seen off your list.
That will also help control what Ms. Cotte terms “anchoring and adjustment bias”: If you’ve seen 20 crummy houses and then one decent one, you’ll assess the decent one as being better than it actually is.
And do not — repeat, do not — feel guilty for making your agent troop around for days on end or think you have to please him or her by buying.
And what if, by following all this advice, you feel you missed out on the “perfect” home?
“There’s always another opportunity,” Mr. Manherz says.
Looking for a great mortgage rate, Call Dominion Lending centres BTB Mortgage Solutions at 905-357-5366 or toll free 1-877-357-5366
Price, square footage, location: “All that can be trumped by the visceral reaction of seeing a home,” says June Cotte, who teaches marketing at University of Western Ontario’s Ivey School of Business.
“Smells, colours, sounds you can hear inside or from the outside — you might not be aware of them, but they can have an influence.”
The layout may even subliminally remind you of the home of a former boyfriend, Ms. Cotte says. That can have a positive or negative emotional impact on how you perceive a home.
In fact, a study published in the Journal of Advertising Research in 2002 said emotions can be twice as important as knowledge in consumer buying decisions. Subsequent research has determined that the role of emotion in buying situations varies by individual and circumstance, but there’s no doubt that, overall, it’s a critical factor in consumer behaviour.
And while it’s important to feel an emotional tie to the place you live in (it can inspire everything from maintaining the house properly to caring about your community), abandoning your inner Mr. Spock and his logic isn’t wise.
Take aspiration, for example. We judge a potential purchase in part by whether we think it will represent what we would like to be and how we’d like to be perceived. An empty nester, however, might actually be happier staying in peaceful suburbia instead of buying a loft in a noisy downtown area just because he fancies himself a young-again urban hipster.
As well, we fall victim to confirmation bias, the pervasive tendency to cherry-pick or interpret information that confirms our preconceptions. We fall in love with a house and so we dismiss the mouldy smell, saying the place just needs a little airing out.
We also readily become invested psychologically in a property before we’ve reached a rational decision, according to professor Michael J. Seiler, who specializes in behavioural real estate at Old Dominion University in Norfolk, Va.
“You’re looking at a house and suddenly start thinking of the community, and the neighbours, and how they’ll be your friends.
“Expectations, fears, desire for status — a lot of stuff influences you,” he says. “So be cautious, try to be rational.”
Influences are at work before you ever enter a prospective home. Billboard, newspaper and other advertising fosters expectations, Ms. Cotte says.
If a builder advertises extensively, for example, you might make the illogical assumption that because the company spends oodles of money on advertising, it must be profitable, so it must be good. “It’s called accessibility bias,” she says. “The most accessible brands, the ones that immediately come to mind, we value as being positive.”
Matthew Sachs, general manager for Ottawa builder Urbandale, says when advertising, “you hook with emotion and reel in with intellect.” A radio ad, for example, might ask, “Remember the first time you fell in love?” It would then segue from romantic love to love of a house, tack on some factual benefits — energy efficiency for example, although Mr. Sachs says that might be couched as “comfort” or “you’ll save money” — and exit with another emotional hook.
When it comes to face-to-face sales, Mr. Sachs says Urbandale has no defined strategy except to listen closely to what the prospective buyer wants.
His advice to home hunters: “Excitement is important if you’re buying a house, but do your research. Validate and verify.”
Eric Manherz, a Royal LePage real estate broker in Ottawa, says a good agent will help clients keep emotions in check and concentrate on finding what it is they really want. That, he says, takes time and may not be what the buyers had originally thought.
He also sees peer pressure at work. “People at coffee break say, ‘You should never offer full price.’ In some cases, you should. And maybe those people bought years ago, when the market was different.”
Because having too many choices often leads to inaction, Mr. Manherz says that, after a day of house hunting, it’s a good idea to scratch most of what you’ve seen off your list.
That will also help control what Ms. Cotte terms “anchoring and adjustment bias”: If you’ve seen 20 crummy houses and then one decent one, you’ll assess the decent one as being better than it actually is.
And do not — repeat, do not — feel guilty for making your agent troop around for days on end or think you have to please him or her by buying.
And what if, by following all this advice, you feel you missed out on the “perfect” home?
“There’s always another opportunity,” Mr. Manherz says.
Looking for a great mortgage rate, Call Dominion Lending centres BTB Mortgage Solutions at 905-357-5366 or toll free 1-877-357-5366
Tuesday 19 March 2013
Could your finances use a mid-March boot camp?
It seems like only yesterday that calendars ticked over to 2013 but here we are in the middle of March. Nevertheless, you don’t have to wait for the New Year to implement a new resolution – setting aside one random day for a financial bootcamp to free up thousands of dollars a year is always a smart move.
With many recurring monthly expenses, there are plenty of opportunities to save money. Here’s how to get started: Grab a pen and paper – or spreadsheet – and list the items, the monthly cost, and the phone number for customer service, for each one. Leave one column open to list the new cost you’re hopefully going to get and one final column to calculate the monthly savings. See the example below.
Scan your bank and credit card statements to help you put together your list of expenses. Everything is fair game: insurance policies, cellphones, TV, Internet, gym memberships, banking fees (including credit card interest rates and annual fees), and so on.
Before you call each service provider, you need to check what the competitors are offering for the same services. While this involves some research, it can help you negotiate with your current provider – and in some cases it might lead you to switch. If that is the case, make sure to ask your current service provider about any possible cancellation fees, and then bring these up with the competitor to see if they will cover them.
When looking at items like your Internet package, make sure to consider downgrading. Many people are paying for packages they don’t fully use . With credit cards, ask about lower interest rates and waiving annual fees. The same goes for inquiries to competitors – they may be more willing to waive the fee, if even for just the first year, to secure new business. And remember, rewards programs are irrelevant if you carry a balance. Who cares if you earn 2 per cent in rewards when you pay 18 per cent interest?
There is no shortage of guides on what expenses to look at and how to do some research. But I’ll finish with a step that is the most important part of the whole exercise. Add up the total in monthly savings and that is exactly how much you need to contribute to a new automatic saving program in a high-interest savings account or use to pay down credit card debt faster.
Remember: you were used to not having that money anyway. You need to do something productive with the savings otherwise you’ll just spend it elsewhere. Otherwise this little bootcamp exercise will amount to a little pain, and no real gain.
BTB Mortgage Solutions 905-357-5366
With many recurring monthly expenses, there are plenty of opportunities to save money. Here’s how to get started: Grab a pen and paper – or spreadsheet – and list the items, the monthly cost, and the phone number for customer service, for each one. Leave one column open to list the new cost you’re hopefully going to get and one final column to calculate the monthly savings. See the example below.
| Item | Monthly Cost | Phone Number | New Monthly Cost | Monthly Savings |
| Cellphone Co ABC | $75 | 1-888-xxx-xxxx | $55 | $20 |
| Auto Insurance | $175 | 1-888-xxx-xxxx | $155 | $20 |
| … | … | … | … | … |
Scan your bank and credit card statements to help you put together your list of expenses. Everything is fair game: insurance policies, cellphones, TV, Internet, gym memberships, banking fees (including credit card interest rates and annual fees), and so on.
Before you call each service provider, you need to check what the competitors are offering for the same services. While this involves some research, it can help you negotiate with your current provider – and in some cases it might lead you to switch. If that is the case, make sure to ask your current service provider about any possible cancellation fees, and then bring these up with the competitor to see if they will cover them.
When looking at items like your Internet package, make sure to consider downgrading. Many people are paying for packages they don’t fully use . With credit cards, ask about lower interest rates and waiving annual fees. The same goes for inquiries to competitors – they may be more willing to waive the fee, if even for just the first year, to secure new business. And remember, rewards programs are irrelevant if you carry a balance. Who cares if you earn 2 per cent in rewards when you pay 18 per cent interest?
There is no shortage of guides on what expenses to look at and how to do some research. But I’ll finish with a step that is the most important part of the whole exercise. Add up the total in monthly savings and that is exactly how much you need to contribute to a new automatic saving program in a high-interest savings account or use to pay down credit card debt faster.
Remember: you were used to not having that money anyway. You need to do something productive with the savings otherwise you’ll just spend it elsewhere. Otherwise this little bootcamp exercise will amount to a little pain, and no real gain.
BTB Mortgage Solutions 905-357-5366
Search for the best rate stressful, poll reveals
An ING survey suggests 59 per cent of Canadians find negotiating for the best rate the most stressful part of obtaining a mortgage – ironically, results that provide support for the mortgage brokers ING has now left behind.
“I’d say per cent of people would probably tell you that interest rates are the most important part of the process before they begin,” says Verico Premiere Mortgage agent Jason Friesen, reacting to the poll. “That drops to about 50 per cent once they have gone through the process. With the banks, you have specialists who are a jack of all trades, but master of none. They know just enough to be dangerous.”
That may be reflected in the Angus Reid online survey, commissioned by ING Direct and canvassing respondents on a host of mortgage experiences.
Some 65 per cent of respondents age 18 – 34 indicated haggling for a rate was among the most stressful part of the mortgage process while over half (56 per cent) agreed researching and comparing offers made the process more difficult.
Most (59 per cent) found that renegotiating for a rate was stressful, while deciding on the right term and payment schedule (55 per cent) and getting customer service help from the lender (35 per cent) were close behind.
More damning of the process itself, 67 per cent of Canadians surveyed who currently have a mortgage feel the process was either too complicated (31 per cent), confusing (20 per cent) or hard to figure out (16 per cent).
“There is a battle for clients out there, and a real lack of knowledge among people looking for a mortgage,” Friesen told MortgageBrokerNews.ca. “That is what we need to do as brokers: move them beyond the ‘low rate gratification’ and spend an hour just to get to know them, and find out what their needs are.”
Friesen does tip his hat to ING, describing them as a “great friend to the broker industry” before they officially left the channel in February.
Since ING’s takeover by Scotia last year and its departure from the broker channel in February, there has been a transition of staff and clients to Scotia as the big bank is now focused on the broker channel, while ING has dedicated itself to the direct-to-consumer model.
“Whether you're a first-time home buyer or shopping around for a new mortgage, applying for a mortgage doesn't have to be a confusing or complicated experience," states Peter Aceto, president and CEO of ING Direct. “Choosing a bank that provides a great rate up front and offers flexible terms means saving both time and money over the long run.”
The February 27 online survey was conducted among a sample of 1,519 Canadians who are Angus Reid Forum panel members, with a margin of error +/-2.5 per cent, 19 times out of 20.
RBC’s Rate Match no match for brokers?
Brokers are describing RBC’s newly launched Rate Match campaign in less than glowing terms, pointing out the exclusion of monolines as evidence of a broker’s skill at finding the best deal.
“It’s all smoke and mirrors; they know that the monolines have better rates,” says Brian Nason of Mortgage Architects in Hamilton. “The average consumer is very aware of the monoline rates and is extremely rate conscious. Underestimating the consumer is definitely to our advantage.”
RBC launched the Rate Match campaign this month, promising to match the mortgage rates of 10 Canadian financial institutions – the majority of which are closed to mortgage brokers, and none of which are monolines.
“RBC doesn’t want to be bleeding cash, and they are accountable to the shareholders,” “I think they realize that brokers should be able to get the same rate or better. The banks have to maintain a threshold of profitability.”
“They are making the client go and do the work for them, finding the best rate,” “If I am going to do the work myself, why should I stay with RBC if another lender has a better rate?”
RBC is simply focusing on rate. “It speaks volumes of the lender,” “They (RBC) are not stepping up to the plate, but providing the lowest rate after the fact. If they want to offer the best rate, they should offer it up front.”
It is the latest move among the major lenders to seize a larger slice of the mortgage renewal pie, countering BMO’s 2.99 per cent 5-year fixed rate announcement earlier in the month. It is also another body blow to mortgage brokers, who are finding it difficult to go toe-to-toe against the banks without giving back bps on commission.
“All is fair in love and war,” . “But it isn’t good business.”
the banks typically lavish deals and attention on a new client to secure their business, only to stick them with regular rates once the special rate has expired.
“Like any bank, once you are in the door, there are no more special rates,” he says. “That’s the difference between mortgage brokers and banks – a bank is never going to tell you the benefits of a variable rate.”
Tuesday 14 August 2012
3-Month Penalties Aren’t Always Clearcut
Breaking a closed mortgage usually results in a penalty. With a fixed mortgage, that penalty is typically the greater of 3-month’s interest or the interest rate differential (IRD).
The dreaded IRD has been debated here ad infinitum, but there’s one thing we haven’t covered yet. There is a subtle twist to some lenders’ 3-month interest penalties that many folks aren’t aware of.
The dreaded IRD has been debated here ad infinitum, but there’s one thing we haven’t covered yet. There is a subtle twist to some lenders’ 3-month interest penalties that many folks aren’t aware of.
When most people calculate a 3-month interest charge they do so by taking their mortgage balance, multiplying by their interest rate, and dividing by four.
That usually works…unless your lender calculates the penalty with a different rate than your contract rate.
Believe it or not, a few lenders (see below) jack up the rate they use to figure their 3-month penalties. These lenders will typically base your penalty on the posted rate at the time you closed the mortgage, instead of your actual rate.
Let’s examine the difference this makes to the typical mortgage holder.
The average mortgage balance in Canada is $170,000, according to CAAMP. The average mortgage rate is 3.64%, or 1.77% off posted rates.
Therefore, the penalty for a “typical” mortgagor being assessed a 3-month interest charge would be about $1,547.
By contrast, the 3-month penalty based on posted rates would be almost $2,300.
In other words, lenders who use arbitrary posted rates to calculate their 3-month interest penalties drain the typical borrower of an additional $752 based on a 20-year amortization. That is:
In case you were wondering, there is no legislation prohibiting this practice.
“There is nothing in the Bank Act (or Interest Act) that stipulates exactly what interest rate should be used in the calculation of a mortgage prepayment penalty,” says Natasha Nystrom, Communications Officer at the Financial Consumer Agency of Canada. “The calculation itself is a business decision.”
Theoretically, a lender can use almost any rate short of usury to calculate your penalty, as long as it tells you in advance.
“The Bank Act does require that all Federally Regulated Financial Institutions (FRFI) initially disclose the manner in which their penalty is calculated as well as a description of the components included in the calculation of the penalty,” Nystrom adds.
Here’s what we’d take away from all this...
When you’re comparing two mortgages and the rates are equal, all other terms are rarely equal. The method your lender uses for penalty calculations is one of many reasons why the rate you get doesn’t determine the interest you pay.
That usually works…unless your lender calculates the penalty with a different rate than your contract rate.
Believe it or not, a few lenders (see below) jack up the rate they use to figure their 3-month penalties. These lenders will typically base your penalty on the posted rate at the time you closed the mortgage, instead of your actual rate.
Let’s examine the difference this makes to the typical mortgage holder.
The average mortgage balance in Canada is $170,000, according to CAAMP. The average mortgage rate is 3.64%, or 1.77% off posted rates.
By contrast, the 3-month penalty based on posted rates would be almost $2,300.
In other words, lenders who use arbitrary posted rates to calculate their 3-month interest penalties drain the typical borrower of an additional $752 based on a 20-year amortization. That is:
- About 49% more than other lenders
- Roughly equivalent to paying a 10 basis points higher rate over five years.
In case you were wondering, there is no legislation prohibiting this practice.
“There is nothing in the Bank Act (or Interest Act) that stipulates exactly what interest rate should be used in the calculation of a mortgage prepayment penalty,” says Natasha Nystrom, Communications Officer at the Financial Consumer Agency of Canada. “The calculation itself is a business decision.”
Theoretically, a lender can use almost any rate short of usury to calculate your penalty, as long as it tells you in advance.
“The Bank Act does require that all Federally Regulated Financial Institutions (FRFI) initially disclose the manner in which their penalty is calculated as well as a description of the components included in the calculation of the penalty,” Nystrom adds.
Here’s what we’d take away from all this...
When you’re comparing two mortgages and the rates are equal, all other terms are rarely equal. The method your lender uses for penalty calculations is one of many reasons why the rate you get doesn’t determine the interest you pay.
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