Thursday, October 05, 2017

Good reasons to use a mortgage broker

Owning a home is usually on a list of lifetime goals. And new home buyers usually have a lot of questions. Some worry about coming up with the down payment, some aren’t sure about their credit scores, others are self-employed, and already know that it can be challenging to get credit at all.

These concerns and any other questions home buyers have can be answered by mortgage brokers. In fact, mortgage professionals are valuable resources who are often overlooked simply because they are not connected to a bank. In some regions, there is still a perception that brokers are last resort lenders. In fact, mortgage brokers have access to most lenders, including the banks, and are uniquely qualified to assist clients get into the best mortgage products.

Angela West, a first-time home buyer in the North Bay area in Ontario decided to use a mortgage broker with her purchase, initially to get a better rate, but it turned out to be more than she expected.      

“The process was very easy, much easier than dealing with the bank. My self-employment wasn't an issue, where it would have been with the bank. My partner has also made very different amounts of money in the past three years, even though last year was a really good year for him salary-wise, so that may have been an issue with the bank as well.”

West also said it was clear to her that the broker took the time to get the best deal – the best product and the best rate. “I liked the fact that someone was on my side.”

The whole experience was a positive one despite the perception some consumers may have.  “I can see where some people may be concerned that a mortgage broker is less "legit" since they aren't working with established financial institutions, but it wasn’t the case. I would definitely recommend using a mortgage broker.”

Bud Jorgenson, Vice-President, Prairies Region for TMG The Mortgage Group said mortgage brokers have an edge with first time home buyers because of their knowledge about the home buying process.

“We fully understand every aspect of the deal, from Purchase and Sale Agreements, working with lawyers, home inspectors, and lenders, to closing processes and the costs associated with that, “he said. We understand title insurance, default insurance, mortgage protection insurance and we are knowledgeable about legal requirements for a variety of different properties.  And because we fully understand it, we are there to help guide our clients throughout the whole process.”

For Ian Syphus, who refinanced his home in Niagara Falls, Ontario to consolidate debt, the process was surprisingly easy and stress-free.

“The Broker did everything, --she prepared the paper work, found the best rates, clarified any concerns -- I just needed to sign,” he said. Syphus also liked that the broker went to his home.
This is a big plus according to Gord Appel, Vice-President, Alberta Region for TMG. “Using mortgage brokers save valuable time for clients by eliminating the need to visit a variety of lenders and fill out multiple applications. Our hours are generally the client’s hours and we can be mobile, which can certainly benefit busy families.”

Follow up after financing was also an important factor for both West and Syphus. “I like the fact that I am always updated on rates via e-mail newsletters,” Syphus added. “And there is constant contact even after the papers are signed – that’s much more personable than banks.”

This is a key reason clients will benefit from working with mortgage brokers, according to Gerald Krahn, Vice-President, and Ontario Region for TMG. “Brokers take time to listen to a client and do what’s in their best interest, not only for the short term but will look at the whole picture 5, 10 years down the road. For example, when some banks introduce a low fixed rate, it may come with certain restrictive conditions. When brokers quickly counter that with the actual facts, the result is a stronger relationship with clients.”

Mortgage brokers are continually focused on the industry and keep up-to-date on changes. “We are truly experts on all things mortgage-related,” added Dan Pultr, Vice-President, B.C. “However, our expertise is not limited to mortgages. We understand our local real estate markets. We also understand credit issues and ways to improve credit scores, with the end result of helping clients achieve their dream of home ownership.

With the changes in mortgage rules and qualifications over the last two years and the rising interest rates, TMG The Mortgage Group continues to offer its brokers the tools and support that helps them better serve their clients.

Find your local TMG mortgage broker at

Sunday, September 10, 2017

Equifax Data Breach – Here’s What You Can Do Right Now

It is still unknown how many Canadians were affected by the security breach at credit-monitoring company Equifax Inc., which was revealed on Thursday, September 7. The breach could have an impact of up to 143 million people in the United States. As for Canada, all Equifax said was that the breach affected “limited personal information" for an undisclosed number of Canadians. 

The information stolen include: Consumers’ names, social insurance numbers, birth dates, addresses, credit card information and, in some cases, driver’s license numbers.

The company has established a website -- -- where people can check to see whether their personal information may have been stolen. Consumers can also call 866-447-7559 for more information. Here are five tips to help make sure your information has not been compromised.

  1. Check your credit report for free. You are allowed a free copy of your credit report, by request. Then you can see if there have been any credit inquiries. The free version doesn’t give you your score.
  2. Monitor your credit. If after checking with the company’s website, you find there has been a breach of your personal information, consider taking the company’s offer for free credit monthly monitoring reports for a year – after the year is up there is a cost. WARNING: There has been discussion that if you choose to do this you may not be able to participate in a class action suit. Read the fine print.  If you find you have not been affected, it’s still a good idea to keep an eye on your credit score, whether through paying for credit monitoring or accessing a number of free credit monitoring apps that are out there. If your monthly score drops, then it may indicate that something has happened. 
  3. Freeze your credit reports. You can freeze your Equifax account. This restricts access to your credit report, which helps prevent other credit card companies from accessing it to open new accounts.
  4. Keep an eye on bank accounts and credit card statements. Go through all your bank, retirement, and brokerage accounts, as well as your credit card statements to look for any suspicious activity. Report any suspicious charges and cancel your compromised card for a new one.
  5. Put a fraud alert on your credit. This is a free service.  You'll be contacted if someone tries to apply for credit in your name. It lasts 90 days and can be renewed.

Monday, August 28, 2017

How to prepare for rising interest rates

Over the past few years it seemed every expert was telling us that interest rates would be rising, and now after years of record low rates, the Bank of Canada (BoC) has started to raise them. The first increase was in July, the first in seven years from 0.5 per cent to 0.75 per cent, citing “bolstered” confidence that the Canadian economy has emerged from years of slow growth.

Canada’s largest banks matched the central bank’s move by raising their prime rates by a quarter-percentage-point to 2.95 per cent. Prime rates influence the cost of borrowing on floating-rate loans, including variable-rate mortgages, credit lines and student loans. It’s expected the BoC may continue to raise the prime rate incrementally over the next few months and into 2018.  However, economic conditions change and so do outlooks and forecasts.

Fixed-rate mortgages are tied to bond prices and yields and currently they are fairly flat. There is some talk about the impact of risk-sharing going forward in the mortgage market, but for now, all quiet of that front.

So, here we at a crossroads again when getting a mortgage. Do you take the fixed rate or the variable rate? And once again, the answer is – it depends.

Many home buyers choose a fixed rate because they know exactly how much principal and interest they pay on each regular mortgage payment throughout the term. However, when interest rates go down, they can’t take advantage of that to save money on interest.

Variable rates continue to be popular among home buyers, with fixed rates gaining favour because they continue to be relatively low. At this writing, a five-year fixed rate varies from 2.89% to 3.09% while a variable rate ranges from 2.2% to 2.6%.

A study of mortgage data from 1950 to 2007 found that by choosing a variable rate mortgage, Canadians saved $20,000 in interest payments over 15 years, based on a $100,000 mortgage. At that time, homeowners were better off with a variable rate mortgage than a fixed rate mortgage 89% of the time.

In today’s market variable and fixed rates do not look as if they’ll be dropping.  It is possible that rising interest rates are here to stay, but it’s important to ask the question: Is it just a blip or a trend?  Time will tell.

In the meantime, it might be prudent to prepare for rate increases this year and through 2018.  Here are some suggestions:

  • Lock in your mortgage.  When prime rates start rise, variable-rate mortgage holders may be vulnerable. This is a personal decision and is based on your risk tolerance. At minimum, consult your mortgage broker to find out what works best for you.
  • Don’t commit to long-term GICs. It doesn’t make sense to tie up your money for five years in an environment where rates are likely to rise.  Speak to your investment counsellor.
  •  Stay short-term with bonds. When rates rise, bond prices go down. That doesn’t mean stay away from bonds, just invest in the short-term. Again, speak to your investment counsellor.

We have been in an historically-low interest rate environment for eight years now -- it looks as if it may change.  



Tuesday, August 08, 2017

Enough already!

By Mark Kerzner, President, TMG The Mortgage Group

Changes to the mortgage rules may have gone too far.

Just when we think, when we are told, that the mortgage regulation pause button has been hit, we see the Bank of Canada (BOC) increase its overnight rate by 25 bps, OSFI released a new discussion paper, including a recommendation to qualify all borrowers at 200 bps above the contract rate, and proposed changes to close a number of tax ‘loopholes’, all of which may have considerable impact to our livelihoods. Add to that the ongoing discussion about introducing Risk Sharing in 2018 and a number of us are saying “enough already!”

In terms of the Bank of Canada 25 basis point increase there may be another in the Fall. In 2015 when the price of oil plummeted the Bank of Canada decreased the overnight rate by 50 bps. Even though the banks only passed 30 of those 50 basis points along to consumers, the Bank of Canada essentially has a “free” 50 bps to play with. Notwithstanding mixed growth data, a Canadian dollar that has appreciated approximately 10% this year and inflation data that suggests we remain at the bottom end of the tolerance levels, there is essentially another 25 bps of rate yet to recapture. 

The Office of the Superintendent of Financial Institutions (OSFI) is proposing changes that align with their July 16 announcement and strengthen the expectations they have in a number of specific areas including: 

  •  Requiring a stress test for all uninsured mortgages of at least 2% above the contract rate
  • Requiring that Loan to Value measurements remain dynamic and adjust for local market conditions where they are used as a risk control, such as for qualifying borrowers 
  • Expressly prohibiting co-lending arrangements that are designed, or appear to be designed to circumvent regulatory requirements

We, in the mortgage brokerage industry, have repeatedly made the following requests:

  1. Don't make any more changes without proper consultation and data to support. 
  2. Allow refinances back into portfolio insurance. Make the Loan-to-Value limit 75% instead of 80% if they really consider it risky business. This would be especially important if further regulations were introduced to qualify conventional purchasers at a benchmark rate as it would slow down purchase activity leading to people staying in their houses longer and likely seeking to renovate and improve them instead of moving.
  3. Uncouple the stress test from the benchmark rate (currently at 4.84%) and set it using an agnostic measure. The difference between the 5 and 10-year bond yields could be used as a proxy with a floor set to 75 points.  Create safeguards for clients who qualified under the previous rules to be able to port, renew or refinance based on qualifying at the contract rate.
  4. Apply the newly adjusted stress test to all mortgage applications. This will allow for industry competition among channels and among lenders. Keep in mind that OSFI’s mandate is to ensure the solvency of the financial institutions for which it regulates. If it there is separate qualifying criteria between high and low ratio loans then it may incent people to ‘cheat’ with their down payments to end up in a low ratio bucket but thereby adding risk to banks balance sheets.

Changes to close ‘loopholes’ for ‘income sprinkling’ and ‘passive investments’ could potentially be the biggest changes to our tax system since the introduction of capital gains more than 40 years ago. The mortgage industry’s association, Mortgage Professionals Canada, is consulting with other national industry associations. 

We at TMG are consulting with tax experts so that we have the opportunity to recommend a course of potential action.

What I can say and what I have seen is that a lot of collective voices are definitely more meaningful than a sporadic few. 

Sunday, July 23, 2017

We are TMG -- Our Story

It was 27 years ago this month that TMG The Mortgage Group was born.  With a network of approximately 800 mortgage brokers and agents nationwide, TMG has assisted hundreds of thousands million Canadians find the mortgage to best suit their financial needs. TMG operates on the premise that a mortgage broker provides the best value for consumers and has the knowledge and expertise to assist anyone seeking mortgage financing advice.

We thought it might be a good time to share our story.

And so, it begins: In the early years, the company operated as Kirk capital Corp. and opened its first franchise in British Columbia under London, Ontario-based “The Equity Centre,” led by industry pioneers Grant and Debbie Thomas. Four years later, CIBC purchased the master franchisor and changed the name to The Mortgage Centre. In 1997, Kirk Capital Corp. parted ways with that franchise network and changed its name to The Mortgage Group, becoming an independent privately-owned mortgage brokerage firm.

Both Grant and Debbie are committed to the mortgage industry and are dedicated to the ideals of ongoing training and education as well as increasing professionalism among its brokers, agents and regional mangers as well as in the industry as a whole. Many TMG alumni have gone on to become the industry’s stars and thought leaders.

Debbie’s background in teaching and Grant’s experience in the hospitality industry have served them and TMG well. They are invested in the industry and have developed policies and procedures that assist each agent to be successful and grow their business.

Grant and Debbie are proud to be one of the longest operating mortgage brokerages in Canada and they have been the principals since day one. This shows a strong commitment to the industry. The role of a brokerage is to lead, innovate and provide oversight. We strongly believe that TMG has succeeded in doing just that.

Not only are Grant and Debbie committed to the success of TMG, they have shown passion and dedication for the success of others and the industry at large.  As part of a very influential Western core group of broker advocates in the early 1990s, they were instrumental in ensuring that Western brokers were properly recognized. Through their efforts, mortgage lenders such as Scotia Bank and HSBC added the West to their business market

They have been able to maintain and even strengthen the TMG family in the wake of impressive growth. TMG is not a big, faceless company. It is a small company that continues to grow.

For Debbie Thomas, Partner of TMG, education was the key to helping brokers and agents develop and grow their business. “When we started, mortgage brokers had a bad rep and were considered a last resort. I wanted to educate the public of the benefits of using a broker,” she said.

Over the years, the industry has made inroads into gaining market share, which sits at approx. 35% among all borrowers -- higher among first time home buyers. For Debbie Thomas, that’s still not enough. “We just have to keep sending our message out to consumers and make sure our brokers are well-trained.”

Today, TMG continues to develop unique training programs, customized payroll systems, and personalized marketing materials. TMG also built its own recording studio and remodeled its training facility with full HD, Green Screen, broadcasting capabilities.

TMG, an award-winning brokerage, has attracted mortgage leaders from across the industry and across the country. Its regional sales leaders are experienced and well-respected individuals who work directly with brokers in their regions.

 “TMG The Mortgage Group Canada Inc.  is a special company” states Mark Kerzner, President. “So much of our success is based on the relationship that we have developed over the years with our brokers, lenders and industry providers. We are continually looking to the future for ways of enhancing a broker’s value with an end consumer. At TMG we are on the right path.”

Tuesday, June 27, 2017

The Warren Buffet Factor

A lot has changed since Warren Buffet decided to invest in Home Capital and the Canadian housing market.

The billionaire’s company, Berkshire Hathaway, gave the beleaguered company a $400 million cash infusion along with a $2 billion line of credit. 

Prior to this, Home Capital was in challenging position, predicated by a damaging allegation in April that the company had misled its shareholders by disclosing too late that an internal investigation found evidence of fraud and had cut ties with 45 brokers. Although the alleged non-disclosure had occurred at least two years prior, and the company’s business fundamentals were solid, the effect was immediate -- account holders started to withdraw their money, which resulted in a small “run” on deposits.

Shareholders started to sell, resulting in a drop in share price. This phenomenon also spread to a few other alternative lenders in the market, who also saw their share prices fall, for no apparent reason.
While the Home Capital controversy shook up the market somewhat, and fed the rumour mill with talk of bubbles, etc., none of that has come to pass. 

Home Capital Overview

Based in Toronto, the publicly-traded company offers mortgage lending, deposits and credit cards through its principal subsidiary Home Trust. Ninety per cent of the Home Capital’s business originates from uninsured mortgage clients who are turned away from traditional Banks.

As one of Canada’s largest alternative lenders, the company is an important player in the country’s housing market. A niche-market lender, Home Trust was one of the go-to lenders that mortgage brokers used for self-employed borrowers as well as those with some damaged credit. When the crisis occurred, brokers had to quickly find other mortgage lenders to take up the slack.

 If Home Capital was a bigger player in the market, there could have been dire consequences. Its mortgage loan portfolio is approx. $20 billion compared to the $1.1 trillion in residential mortgage loans of the Big-Six banks.

Was there a real issue?
Most analysts acknowledged that the underlying fundamentals of the company were steady, although the allegations created uncertainty.  Mike Rizvanovic, an analyst with the Veritas Investment Research in Toronto said in a Financial Post interview, “This is a very peculiar situation where Home Capital has no issues around credit, and no issues with a capital shortfall. Yet they are being decimated in terms of their viability as an ongoing entity.”

Clearly, Warren Buffet agreed.  Not only does his investment put much-needed capital into Home Capital, it was also a strong endorsement for the company. 

“Home Capital’s strong assets, its ability to originate and underwrite well-performing mortgages, and its leading position in a growing market sector make this a very attractive investment,” said Buffet, Berkshire’s chairman and chief executive officer, in a statement.

The Buffet Factor in Action

Almost immediately, Home Capital shares went up. Other alternative lenders also saw their shares recover. Depositors are coming back, lured somewhat by an excellent interest rate on deposit accounts. 
The other immediate effect was increased confidence in the Canadian housing market as a whole. Many mortgage brokers were forced to find alternative lenders when Home Trust depositors began pulling out their money, leaving the company with a liquidity problem. Mortgage brokers have now begun referring business to Home Trust again.

Warren Buffet’s investment sends a strong, positive message about Home Capital and also about Canada’s housing market.

Wednesday, April 19, 2017

Bidding Wars – Cause or Effect?

What was once the phenomena of the two, major urban centres – Vancouver and Toronto -- has now bubbled over to smaller cities and communities within commuting distance of the big two. 
Bidding wars are now commonplace and can be both rewarding and stressful.

The numbers can vary to $10,000 to $20,000 over asking price, and that’s at the low end, to upwards of hundreds of thousands over asking. One house in Vancouver went for $1 million over asking recently – what seller is going to say no to that? But can the market sustain it? 

Sales of existing homes rose by 8% in February compared to the same month a year earlier, while the national average home price soared 17% according to a Canadian Real Estate Association (CREA) report.

Some experts point to these bidding wars as the cause of high prices. Others say that the phenomena is the result of lack of supply. It may be a bit of both. 

While sellers may be happy about cashing out, the problem becomes, where to go? And buyers, who want to buy a home may not have the financial means to get into a financial tug of war with other buyers. The stress alone may cause them to just stop looking.

Patricia Boon, a veteran Realtor, who has been working in the Woodstock area for 30 years is not happy with the way houses are being sold these days.

“I don’t feel good about what’s happening. No one is looking out for the buyer,” she said. “This is isn’t good for anyone. Why play a game with the most expensive item you’re ever going to buy in your life?”

In Woodstock prices are up 15% over last year and, similar to other cities, there is a lack of single-family homes available for sale, which is creating a perfect scenario for bidding wars as we head into the Spring market.

Even more concerning for Bonn are the offers that go in with no conditions. “It’s not unusual for appraisals to come back lower than the purchase price two weeks before closing, even with a pre-approval,” she said. “Then the buyer has to scramble to come up with more money for the down payment.”

Bonn recalls a time not too long ago when the housing market was facing a similar situation.  “When it was time to remortgage, homeowners could not qualify. Or the market had corrected and now the mortgage that was higher than the property value. Many people walked away.”

To Condition or Not to Condition

Purchasing with no conditions is a slippery slope. Mike Rogozynski, a mortgage broker with OMAC Mortgages Powered by TMG, who works out of the Woodstock area is seeing more out-of-town purchasers and investors coming into the area, which already has a lack of housing supply.

 “Realtors lining up offers is definitely a factor for making the case that bidding wars may inflate prices; however, it’s a fine line,” he said. “ We already have a growing demand and lack of supply.”
Rogozynski strongly advises his clients to always put in a financing condition, even if it’s just three business days. “Anything can happen, even with a pre-approval,” he said. “A key component is the property. An appraisal may come back with a lower value, or a home inspection may turn up something negative.”

The Appraisal

Many appraisers are looking for marketing support when they value a property. Lending decisions are made on a property’s fair market value, which is defined as the market value of an interest in land at the highest price reasonably expected when sold by a willing seller to a willing buyer after an adequate amount of time and exposure to the market.

So, who determines the value of that property? One could argue that the market itself determines the value, which may be true, but a lender wants to know if the purchase price is reasonable.  An appraiser, who is specifically trained and who has sufficient experience, will be asked to offer an independent, impartial written opinion of the property’s value.

Appraisals are done for a specific client -- the lender. Because real estate is the major security for mortgages, the market value estimate needs to be as accurate as possible. 

One appraiser we spoke to from the Brantford area, who wishes to remain anonymous, says he tries to get to the purchase price when evaluating a property but sometimes the sale is a few weeks ahead of the market. For example, appraisers will conduct a comparative analysis of similar properties in the area that have recently sold. If prices are increasing, it may not show up in their analysis yet.

 “I also get a lot Realtors telling me the client spent $50,000 to renovate a kitchen and expect it to value out at that amount, which is not the case,” he said. “The fact that it was an upgrade is considered and is an added value, but not the costs.”

“At the end of the day, we have to be realistic of a property’s true market value and be able to back that up with data.”

A Realtor’s role in rising house prices

A written response from the Canadian Real Estate Association (CREA) said the 'bidding war' phenomenon is usually limited to very active markets where strong demand overwhelms limited supply. Although other Canadian markets may see multiple offers for exceptional/rare/sought-after properties, at the moment it is in Toronto and environs where this occurs regularly.

Pierre Leduc, spokesperson for CREA wrote, “As a marketing strategy, a REALTOR® whose seller has a property that is: a) located in an in-demand area and/or b) a unit-type that is in high demand (e.g. 4-bedroom SFH with garage) may recommend to his client to accept written offers at a certain date/time, which provides potential buyers clarity on when and how this sale will occur.

“It is the buyer's responsibility to decide whether or not to participate in this type of sale, and ultimately, how much to offer,” he added.  “REALTORS® don't have any special persuasive powers to force their clients to offer more than they can afford, offer more than the lender will loan them based on assessed value, forego a home inspection or remove other conditions just to be the successful bidder.”

A free market?

Paul Taylor, Executive Director for Mortgage Professionals Canada (MPC) said it was probably unfair to vilify Realtors in a market that has a significant lack of supply. “The current market is driven by demand and there are so few single-family homes available.”

MPC has been working closely with the legislatures, sharing information and making suggestions. One idea is to include a minimum 3-day cooling off period for buyers so as to relieve some of the stress.

“We favour a free market system and we don’t want to get in the way of that,” he said. “However, there is increasing impatience among buyers who want to purchase, which increases the pressure they feel to make condition-free offers.  It’s tough to say what’s best in the long run.”

Bidding wars are indeed risky. If this is the only option, here are some tips:

  1.  Do your research -- learn about the market values in the neighbourhood. 
  2. Get pre-approved. Make sure your mortgage broker has all documents upfront. 
  3. Although conditions with offers may get sidelined, try to get a financing condition for at least three business days
  4.  Sometimes, it’s not always just about the money, so write a letter explaining why you want that particular house.

Good luck!