Exploring The Latest Facts About Mortgage In Canada

Just recently, observations show that mortgage rates have been shifting down lower progressively. That is in Canada in particular. However, there are also some changes being made by policymakers that can gravely affect the rate placed on such mortgages. If you are thinking of buying a new home in Canada, you need to know about the latest facts about mortgage and mortgage rates.

Banks and collateral mortgages

Joe Oliver, Finance Minister of Canada, have just made an announcement that eight of the largest banks in the country have already worked their way to provide prospects and even their clients with more details regarding joint accounts, power of attorneys and collateral mortgages. If you have been doing your homework, you know that it is not that easy to transfer an existing collateral mortgage to other banks once renewal time comes. The difficulty in doing so is stretched out to the fact that corresponding fees come with the transfer and the more disappointing fact is that the fee can even reach up to thousands of dollars.

Collateral mortgages and how they are offered at the moment

In Canada, the scenario on how collateral mortgages may be availed of by a consumer is this: Most lenders always offer collateral mortgage as an option to their prospects or existing clients. However, only two of the largest banks in Canada, namely Tangerine and TD Bank are offering collateral mortgages to their consumers. With only two out of the many banks offering this type of mortgage, it would even be hard for borrowers to know they are signing a collateral mortgage unless the bank informs them about it.

Disclosure issues

Whilst the eight banks have vouched to push efforts in informing clients about collateral mortgages, and all their other products, it cannot be denied that there is still fear as to seeking mortgages with banks simply because there are no clear guidelines on paper that will somehow mobilise the dissemination of information to their clients. Training bank employers, putting up posters on their respective bank branches and even posting information online may help but these are not sure guarantees that customers will be informed about how the real system works.

Actions being considered by Canada Mortgage and Housing Corporation (CMHC)

At the moment, mortgage insurance from CMHC is being purchased by borrowers with a down payment amounting to less than 20%. This currently protects Canadian lenders in case a borrower defaults on payment. Meanwhile, CHMC is considering imposing a corresponding deductible from banks on any mortgage that is insured via the Crown Corporation. The deductible will be enforced on banks before the claims will be paid.

What does this mean for borrowers?

With all the changes that have been happening and with CHMC considering actions, National Bank Financial analyst Peter Routledge thinks that the action could mean higher mortgage rates on the part of borrowers. This is but logical considering that banks may need to have more capital thus driving up their costs accordingly. Lenders would also then have to bear with the risk that comes with mortgage defaults.

A much worse scenario is seen by Verico Butler Mortgage’s Ron Butler who feels that the funding of deductibles for default borrowers will now be a responsibility placed on the shoulders of the whole borrowing public. This funding will come from higher rates on mortgages availed by borrowers. The only solution is to really strictly force the largest banks in the country to take charge of deductible costs. However, that is still very far from actually happening.

What can borrowers do then?

With this frightening scenario on asking a mortgage from big banks, borrowers will surely have apprehensions of obtaining a loan for that much needed project. However, there are things you can resort to if you are thinking of obtaining a mortgage. These solutions are as follows:

  • You have to be well-informed about how the entire mortgage system works. It would be good to compare mortgage rates from one lender to another. You should always raise your concerns before you obtain that much-needed loan to fund your house, car or any big time project.
  • You also have to converse with your choice of mortgage lender. If you cannot rely on banks when it comes to obtaining a loan with lower mortgage rates, then you have a choice to opt for other mortgage lenders instead.
  • It will also help to explore and learn more about the real business of the mortgage lender. If you can ask the lender where funding comes from, then it would be good enough to keep you on track of the mortgage you are about to make. You have to know what their options are for each type of mortgage available.

For more on the lowest rates in Montreal and how they will work for you, feel free to enquire from us. We will be more than willing to walk you through the entire process – from understanding how our services work to how it will benefit you and how much you should pay on amortisations.

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