Lowest 5 year Fixed Rate Mortgages in Canada Ever!

The Finance Minister and the heads of the Big Canadian Banks have recently been alluding to the fact that the property market in Canada, particularly in the real estate markets in Vancouver and Toronto may be getting a bit too hot for their liking based on the very low interest rates we are seeing in Canada right now.

And then came this…

2.99% on a 5 Year Fixed Mortgage? Whats the Catch?

This is the lowest 5 Year Fixed Rate Mortgages have EVER been!

I recently interviewed Vancouver mortgage broker, Chad Watts about the ultra low mortgage rates that the big banks are offering, primarily the 2.99% 5 Year Fixed Rate Mortgage.

When I heard about these mortgages, I thought:

A) “Whats the Catch?” and,

B) “How can the Banks afford to offer money this cheap?” and apparently others shared my thoughts on that question.

The Catch.

But today we are talking about the “Catch” with these 2.99% 5 Year Fixed Mortgages, and here’s what it is:

1. Amortization: No amortizations longer than 25 years. Investors looking for the longer 30 to 40 year amortizations still allowed with non-insured low ratio mortgages will need to look elsewhere as will those who like the lower payment a longer amortization offers.
2. Prepayments: Borrowers can only pay down 10% per year with this mortgage rather than the standard 20% per year.
3. Closed Mortgage: You can only get rid of this mortgage if you sell the property.
4. Renewal: You can only renew into a very limited range of mortgages offered by the bank if you choose to renew. Very often these options may not be all that good.
5. Not Portable: If you want to sell the property the mortgage is on, you will not be able to port the mortgage over to another property
6. Non-Assumable: You can’t sell the mortgage with the property.

The basic catch is that these mortgages may be great for specific property owners, but their lack of flexibility may not work for many home owners who may have changing housing and investment needs over the next 5 years (which is a long time).

If its Too Good to be True, It is!

Very often it is possible to get mortgages at a slightly higher rate that will allow far more flexibility and can SAVE a borrower a lot of money should they need to make changes to the mortgage in the future.

Looking for Advice on Buying a Property? Check out these great videos for New Home Buyers in Vancouver!

Thinking of Selling and Don’t Know Where to Start? Have a look at the Informative Videos on How to Sell a Property in Vancouver!

Top Vancouver Realtor Advice for First Time Home Buyers – Subject to Financing

In Episode 13 of the First Time Home Buyers Guide for Vancouver, we discussed Subject Clauses in general.

Today we’re going to discuss the Subject to Financing Clause in detail and how it relates to and affects a real estate offer. Chad Watts of the Mortgage Group was kind enough to come and talk to us about subject to financing.

What does Subject to Financing Mean?

Subject to financing basically means that a Buyer, for up to 7 days after an offer is accepted, can walk away from or kill the accepted offer if the Buyer cannot get satisfactory financing.

Keep in mind this is a subjective criteria based on the Buyers opinion of the financing as to whether it is satisfactory or not.

Why Do We Use a Subject to Financing?

Like I mentioned in Episode 13, when it comes to writing offers on Real Estate in Vancouver, SAFETY COMES FIRST!

We use the Subject to Financing Clause to protect the Buyer.

This clause gives the Buyer has sufficient time to get confirmation IN WRITING that the financing or mortgage for the property is confirmed.

Subject to Financing allows the Lender an opportunity to appraise the property to ensure the property is worth what the accepted offer says it is and to confirm the Borrower/Buyer can afford to pay the mortgage. Once the Lender has done this, they can give the Buyer/Borrower confirmation in writing that the financing or mortgage is approved.

Check out this great explanation of how subject to financing works.

How to Identify the Subject to Financing in the Offer

To identify the subject clauses in an offer look for clauses that start with “Subject to…”. The Subject to Financing clauses can be as simple as:

“Subject to the Buyer receiving and approving suitable financing on or before _(date)_ . This subject is for the sole purpose of the Buyer.

The subject to financing could also include details about the financing including payment amounts, amortization, and mortgage term.

How Long is the Subject Period after the Accepted Offer?

Its usually 7 days. This is the time it normally takes a bank or other lender to appraise the property to ensure it is worth what the accepted offer says its worth as well as to satisfy the bank/lender of the Buyer/Borrowers ability to pay the mortgage.

This time can be shortened or lengthened in a negotiation based on the Buyers and Sellers needs, but its advisable for a Buyer to first consult with their Lender before agreeing to a shortened Subject Removal period.

Stay tuned for Episode 15 of the First Time Home Buyers Guide for Vancouver when when we will discuss Subject to Inspection!

Never Sold a Home Before? Need Advice? Check out thee informative Videos on How to Sell a Home in Vancouver!

Thinking of Buying a Presale Condo? Have a look at these great videos on How to Buy a Pre-Construction Condo in Vancouver!

I STRONGLY ENCOURAGE QUESTIONS & COMMENTS BELOW!!

Completing on a Presale Condo in Vancouver and Appraisals.

I recently had the pleasure of interviewing Chad Watts of The Mortgage Group about an experience he had during the the Completion of a Pre-Sale Condo here in beautiful Vancouver, BC.

Developers in many cases only give 10 days notice of the Completion of a Presale Condo. During this time sometimes up to several hundred appraisers need to get access to and appraise the soon to be Completed suites.

What does Completion mean in Relation to Condo Presales?

Completion is when the condominium that had suites pre-sold or sold off plan is ready for occupation (usually after the Occupancy Permit has been granted) and the transfer of ownership from Developer to Presale Buyer occurs ie the Completion. (For a brief explanation of Completion with Video click here).

Why is it Important to get the Appraiser in ASAP?

Once the Developer gives notice of the Completion, depending on the size of the building, up to several hundred Appraisers may need to get access to Presale Buyers suites in the building over a 10 day period.

During this time, there may be limited access to the building by non-Construction personnel and there is a chance that an Appraiser may not get into see a suite in time to submit their paperwork to allow the Completion to occur on time.

If there is a delay in the Completion due to the Buyers Appraiser not getting in on time, there may be penalties of up to $2000 payable to the Developer for a late Completion.

Avoid Penalties! – Get the Appraiser in During the Deficiency Walk Through!

When a Buyer is Completing on a Presale Condo, there will be a deficiency walk through that the Buyer is required to have before they Complete. To avoid these penalties mentioned above, its a very good idea to have the appraiser through the new condo when the Buyer does their deficiency walk through.

Looking for Advice on Buying an Off Plan or Pre-Construction Condo?

Check out these Great Videos on How to Buy a Presale Condo in Vancouver!

Looking to Sell that Newly Completed Presale Condo?

Have a look at these Great Videos that explain in detail the process of Selling a Condo in Vancouver!

I STRONGLY ENCOURAGE COMMENTS AND QUESTIONS BELOW!

Mortgage Pre-Approvals are NOT Guarantees of a Mortgage!

I recently had the pleasure of interviewing Chad Watts of The Mortgage Group about mortgage pre-approvals. He brought up a very important point for Buyers, particularly First Time Home Buyers. And that is a mortgage pre-approval is NOT a guarantee that you will get a mortgage at the amount the Lender originally mentions or get a mortgage at all.

What is a Mortage Pre-Approval?

This is a preliminary estimation by a Lender of how much the Lender will loan you based on very basic information. This number is subject to change based on what property you get an accepted offer on and the details of your financial situation.

Why Your Mortgage Pre-Approval may not match the Mortgage You Get!

A mortgage pre-approval is a basic guideline of generally how much a Lender thinks they can give loan the Buyer. Once the Buyer finds their dream home and have an accepted offer subject to financing on the property they need to forward the offer onto the Lender. The Lender then begins to go over all the details of the property and the Buyers financial situation with a fine tooth comb. This is often where the disparities between the Mortgage Pre-Approval and the actual mortgage pop up.

Too Much Debt, Inaccurate Financial Information, Unpaid Taxes,  and Leaky Condos

There are certain buildings that Lenders will not lend money on for various reasons (Its a leaky condo, its not worth what the accepted offer says its worth, there are issues with title). Sometimes the information the Buyer originally provided the Lender is not accurate or out of date (Buyer is behind on their taxes, or doesn’t have as much money as they thought, or may have too much debt). Both of these variables can result in the Buyer either not getting a mortgage at all or not getting as large a mortgage as they had anticipated.

The CHMC has a cool tool that you can use to test your financial situation to see if you are ready for home ownership that you might find useful.

Totally off topic – Check out the Tightrope Walker in the background of the video!

I REALLY APPRECIATE COMMENTS AND I’D LOVE TO HEAR YOUR THOUGHTS!