Big Bank mortgage penalties uncovered!

General Cameron Wilson 26 Nov

Did you know that, according to the statistics from Statistics Canada and CMHC – Approximately, 22,692 Niagaran’s per year break their 5yr fixed rate mortgage with a Big Bank?
Did you know the difference in penalty from most Credit Unions and Monoline lenders to a Big Bank, average in Niagara, $4,652.56?

Statistics for Niagara:

(Big Bank 74.18% national market share vs credit union/monoline lender national market share 25.82%):

447,888 people/consumers @ 27.9% mortgage holder rate = 124,961 residential mortgage holders @ 74.18% Big Bank mortgage holder = 92,969 Big Bank mortgage holders @ 60% fixed rate = 55,618 mortgage holders @ 68% 5yr fixed rate = 37,820 mortgage holders @ 60% early termination rate (breaking your mortgage before maturity) triggering IRD penatly = 22,692/yr (multiply) net dif. on how IRD is calculated from Big Banks to Credit Unions/monoline lenders – $4,652.56 based on the averages (national mortgage balance, breakage in month 42/60) = net looses up to $105,575,891/yr based on the variation from how IRD is calculated from a Big Bank to Credit Union/Monoline Lender – if all the Big Bank clients chose a different option Niagara’s “people” would retain up to $105,575,891/yr – this is just ONE policy.

If we multiply the difference in penalty – $4,652.56 based on the averages (regional mortgage balance, breakage in month 42/60) times the amount of people who break their mortgage 22,692. The people of Niagara, due to NOT being aware of how policies work, loose approximately, on average annually $105,575,891

If all the Big Bank clients chose a different option like FirstOntario Credit Union or a monoline lender like MCAP we collectively would have an additional $105,575,891/yr kept in our local economy? This is just ONE policy.

If you want to learn how there is such a large variation (Big Banks charge for their IRD penalties appox. 3.7% of the mortgage balance vs most Credit Unions and Monoline lenders who only charge appox. 0.7% of mortgage balance)

Please contact me –

Mortgage and Cars, whats the difference?

General Cameron Wilson 11 Jul

Mortgages and financial stuff are complicated and boring, right? I get that for sure. Believe me, I sometimes have to slap myself to see if I am still alive due to the nature of my work.

Everyone knows cars though, right? We all know the ONLY THING that matters is the SALE PRICE, right? When shopping for a car we do not care about the COST OF OWNERSHIP or SAFETY RATING, right? Some of you maybe be thinking, “hey, when I buy a car there is obviously more I consider then the SALE PRICE.”

Well, a mortgage is no different!!!! A car’s sale price is like a mortgage’s interest rate but have you considered whether the lender calculates their IRD penalty (Interest Rate Differential penalty) using a “posted rate” or do they use the “contract rate” – this portion of a mortgage is the COST OF OWNERSHIP and if you do not think it is important, see what this family and thousands of others have went through by being FIXATED with ONLY the rate and thinking that is all a mortgage is, simply just a rate.

Remember, on a $300,000 mortgage, the difference from 2.69% to 2.79% over a 5yr term with a 30yr AM is ***$960*** or ***$0.22 cents/day***

Whereas, the difference (on the thing that no-one knows about or thinks matters – IRD penalties) can be a $12,000 penalty vs a $3,300 penalty. That accounts for difference of ***$8,500*** or $4.60/day.

Click Here to read – CBC news article on IRD penalties

Canadian’s on average break their 5yr fixed term over 60% of the time!!!!!!

Not all lenders calculate IRD with “posted rates” but all Big Banks do

There is a lot more you do not know, unfortunately. I would happy to share it with you, that is why I became a Mortgage Agent, to help others and in helping others, help myself. Win-win.

Your friend,

Cameron Wilson

Mortgage calculators can save you $1,000’s and in some cases $10,000’s.

General Cameron Wilson 30 Jun

The mortgage market is competitive and rates have to be similar for lenders to stay competitive, which means the savings from one lender to another are not life changing (still very important though). I will say that 95% of the people I work with are completely unaware that there is another component of the mortgage that can literally save you thousands of dollars in unneeded costs and risk and those savings come in the form of how lenders calculate their penalties. With 60% of the Canadian public breaking a 5yr fixed mortgage and on average around month 38 of 60, people individually and collectively as a society are loosing vast sums of wealth due to the lack of attention regarding these processes and policies.

Case Study #1

Fixed rate terms (interest rate differential penalties): If you save $10 per month on the rate/your payment between lender A & B but on a $450,00 balance the penalty to break your mortgage with lender A (all big banks and some credit unions) is around $17,000 and lender B (some credit unions and monoline lenders) is around $4,000. What is arguably the better lender to pursue your mortgage with? This is where I have value, I know how the lenders design their mortgage products and can advise you to safety and provide a comprehensive overview on how the industry works. Now not only are you protected but the knowledge you now have through me, you can now protect your loved ones, as well. Be proactive and do your research, this family unfortunately had a very unpleasant surprise, contact me to avoid this situation.

PS. 60% of Canadians will break their 5yr fixed rate term, typically around month 38. This triggers the IRD penalty and knowing which lender calculates their penalties harshly or leniently can save you thousands of dollars. My job is to know and protect your interests, not the banks.

Cameron Wilson
Mortgage Agent
Dominion Lending Centres Canuck Mortgage Group

Canadian’s holding insured mortgages (CMHC) exhibit low risk appetites

General Cameron Wilson 4 Dec

Great news, Canada!

The Canadian economy has and does enjoy a very profitable real estate and mortgage market, especially so in recent memory. There has also been discussion of “bubbles” in the market and the danger they pose to the Canadian economy with Canadian’s being overleveraged when looking at their incomes versus their monthly liabilities.  The debacle in 2008 in the United States saw a mortgage meltdown that was based on lenders providing mortgages to buyers who in many cases were unqualified, whether it was income, credit score, 100% mortgages or employment status.  Are we in Canada in a similar state where borrowers are taking on more than they can eat?

NO, NO and NO! According to the Canadian Mortgage and Housing Corporation, CMHC for short, we are doing just fine.  Let me show you the numbers and a provide a quick synopsis of what they mean.

CMHC, on November 29th released its Q3 2016 financial results and the numbers tell a very positive picture for the Canadian insured mortgage borrower. Let us keep perspective of what “Canadian CMHC insured borrower,” represents: a $514,000,000,000 or 514 billion dollar market. A huge portion of the Canadian economy.

Canadian’s on average may be over leveraged but it is not due to their mortgage and is more likely to be student debt, credit cards, loans, car purchases, and other consumer debts. Where can this be found in the CMHC Q3 release.  Well, with a 0.32% or a third of one percent arrears rate on CMHC loans that equates to 8,286 loans in Canada, we can conclude that there are currently 2,589,375 loans in Canada that account for the 514 billion dollars of mortgages under CMHC administration. We have total mortgages under CMHC administration of $514,000,000,000 that breakdown into 2,589,375 individual mortgages.  We can now discuss and analyze the individual borrower and assess their ability to withstand disaster in the market.

The Averages:

Loan Size: $198,503.50 (max. $266,193.19 if extended to max GDS of 39%)

Credit Score: 751

Gross Debt Servicing (GDS): 25.7% (max. 39% for qualification purposes)

Equity in home: 34.8%

These numbers represent security from rate fluctuations and property devaluations. Let me explain.  A borrower who has earned a 751 credit score shows responsibility in payment history and proper debt management, which is a good start.  More importantly though, these statistics show that the average CMCH borrower would be able to withstand a significant rate increase of up to double their interest rate. I do not have the exact figure on the average interest rate a CMHC borrower has but because of the 751 credit score, it is likely they are qualifying for prime rates.  Let us assume a rate of 2.85% on a 5yr term for a 25 year amortization.

Doubling of the Rate: 2.85% to 5.7%

Average loan amount: $198,503.5  Payment @ 2.85%: $924/m with GDS of 25.7%

In Canada to qualify for a CMHC backed mortgage you must have less than 39% GDS, we have seen an average of 25.7 but how much of a loan could the unique CMHC mortgage borrower qualify for at 39%? Going from 25.7% to 39% represents an increase of 34.1% and the new loan amount would be $266,193.19.

Max loan amount with current debt vs income: $266,193.19  Payment @ 2.85%: $1,239/m with GDS of 39%

So in terms of affordability the maximum payment for the average borrower would be $1,239 per month regardless of interest rate but based on a 5 yr. term and 25 yr. amortization. 

If interest rates doubled for the average borrower, many would say the end in nigh but not so fast, let’s see what the numbers say.

Average loan amount: $198,503.5  Payment @ 2.85%: $924/m with GDS of 25.7%

Average loan amount: $198,503.5  Payment @ 5.7%: $1,235/m with GDS of 25.7%

As the above example shows with a doubling of interest rate, however very unlikely that is to happen, our average CMHC borrower will still not have breached the 39% GDS or max payment of $1,239/m, great news for our country and people as we can sustain dramatic turns in the market and still have our financial security protected on average.

What about decreasing or declining home values?

Throughout the past century or so we have seen peaks and valleys in the value of property but on average the plain is tilted up and always has increased over time, regardless of periods of devalue. With CMHC’s findings purporting that the average CMHC backed mortgage/property has 34.8% equity in the home, this shows the ability again to withstand short periods of devalue of 10%,20% or even 30% drops which typically are short in duration and rebound quickly after.  

The information summarized above is evidence of our financial sector and government’s adherence to the protection of the Canadian economy and therefore the average borrower’s best interest (i.e. you and me)! With the average borrower scoring well in credit score, GDS score (not maxing out our debt and creating a comfort zone), and very low rate of arrears of only one third of one percent; we can say thank you to our education system and private and public sectors for making sure our lending environment is sustainable and does not place individual greed as a top priority but the common good as their number one priority.

Thank you for reading and I hope you found this insightful. Questions are welcomed and appreciated.

Cameron Wilson BA., IFSE

Dominion Lending Centres Canuck Mortgage Group

Mortgage Agent

Lic# 12503

Home Purchases

General Cameron Wilson 11 Feb

Quick update: When going to purchase a home, if you have not arranged financing yet. You MUST make sure if signing any binding contract for purchase, to add as a condition of the sale “conditional on arranging satisfactory financing within 7 business days.” That way if you are not approved you are not legally bound to the sale and face potential punitive action.

When is the best time to refinance your Mortgage

General Cameron Wilson 24 Dec

Historically it is always a good choice to refinance your existing mortgage when you become encumbered with substantial higher interest debt or an interest rate that is much lower then your current rate on your mortgage.

* Credit Cards

* Educational loans

* Car loans

* Unsecured Loans

When you refinance and include debt like the types listed above, in many cases, you can save money and reduce your monthly payments substantially.  The effect is that you now have much more money to use in other parts of your life.