Vancouver, with its stunning natural beauty, vibrant cultural scene, and thriving economy, is a highly desirable destination for those seeking a new home. However, relocating to a new city, especially one as dynamic as Vancouver, requires careful planning and preparation.

This guide will provide you with the essential information and resources you need to navigate your move to Vancouver with confidence.

Understanding the Vancouver Landscape Vancouver is a unique city with a blend of urban sophistication and outdoor adventure. From its bustling downtown core to its beaches and mountains, there’s something for everyone.

However, the city also presents unique challenges, such as a high cost of living and a competitive real estate market. Vancouver has a strong economy with opportunities in various sectors, including technology, film, tourism, and finance. The city is known to attract highly skilled workers and professionals from around the world, offering a competitive job market.

Planning Your Move to Vancouver

● Establish a Realistic Budget: Moving can be expensive if the appropriate planning isn’t done, so we recommend creating a detailed budget that includes moving costs, housing expenses, storage costs if applicable, and other living costs in Vancouver.

Getting fixed, accurate quotes from Vancouver moving companies is crucial. Be sure to get one that is based on the volume of your belongings and the distance of your move. Choosing a trusted moving service is a win for reducing moving stress so that you can focus on your fresh start once you arrive and unpack.

● Understand the Cost of Living: Vancouver has a high cost of living, and a packed calendar! Explore local museums, festivals, and events to really immerse yourself in all that Vancouver has to offer with its diverse environment and community.

Just to give you an idea, a family of four typically spends $1200 – $1800 per month on groceries. Most people own cars in Vancouver, but that said, the city has one of the best public transport systems in the world, so this cost and lifestyle choice is totally dependent on your proximity to local amenities, and what works best for you.

● Research Healthcare: Familiarise yourself with the healthcare system in British Columbia and ensure you have adequate health insurance coverage. Making the Most of Your Move

Moving to a new city is a significant financial decision, but is one that can completely change your life for the better. As a mortgage professional in Vancouver, I am here to help you navigate the complexities of the real estate market and find the best mortgage solutions for your needs.

Courtesy Top Move

What they are, when they take effect, and who they affect. And how to get around them.

There has been a lot of talk in the media lately about “Trigger Rates”, but not a lot of information about what they really are. First, we must understand what a Variable Rate Mortgage actually is.

VRM vs ARM

When most speak of “Variable Rate” mortgages they are actually referring to two different products: the “Variable Rate Mortgage” (VRM) and the “Adjustable Rate Mortgage” (ARM). While they sound similar there are some important differences.

Banks and Credit Unions typically offer a “Variable Rate Mortgage” which is characterized by an Interest Rate which is tied to Prime Rate (which in turn, is tied to the Bank of Canada Overnight Lending Rate) and so changes over time. The interest rate quoted on the mortgage is normally compounded monthly (interest is recalculated every month), which results in a higher interest cost than “simple” interest (= compounded once per year).

In the event of interest rate fluctuations, Payments normally don’t change, however, the proportion of the Payment going to Principal and Interest does, resulting in a change to Amortization (as interest rates increase, the proportion of the payment going to Interest increases, while the proportion going to Principal decreases, resulting in a longer Amortization … and vice-versa).

“Adjustable Rate Mortgages” are offered by non-Chartered Bank lenders (like First National and MCAP), and the interest rate is typically compounded semi-annually (interest calculated every half-year): this results in an interest cost slightly higher than a comparable “simple” interest rate, but considerably less than when compounded monthly. Note that Fixed Rate mortgages are also normally compounded semi-annually.

ARM mortgage Payments change automatically with Prime Rate, such that the Amortization doesn’t change: as Prime Rate goes up, so too, do payments on ARM mortgages; as Prime decreases, ARM mortgage payments decrease. If your payments have been increasing regularly with Prime Rate this year, you actually have an ARM mortgage, not a VRM.

Trigger Rates

The Trigger Rate on a VRM is the point at which the Interest proportion of the mortgage Payment exceeds 100%, and so the Amortization increases to infinity! It is called the “Trigger Rate”, because when your mortgage reaches this state, the Bank automatically increases your payment to achieve a more reasonable Amortization. The calculation is different for every mortgage, so there is no one Trigger Rate for all VRM mortgages. Because payments change in lockstep with with interest rate payments on Adjustable Rate Mortgages, there is no such thing as a Trigger Rate for an ARM mortgage.

VRM: What To Do About a Trigger Rate

If you do have a Variable Rate Mortgage, most lenders have some kind of “Rule of Thumb” for calculating the Trigger Rate, however is safe to say that most VRM mortgage holders are close to it right now. The best and easiest thing to do about it, is to take control of your mortgage by increasing the Trigger Rate. To do this is quite simple, as VRM (& ARM) mortgages nearly universally have a provision to increase the regular payments: depending on your current payment, a relatively small voluntary increase in the Payment will increase the Trigger Rate substantially and avoid a higher payment calculated by the Bank’s computers!

As mortgage brokers, we know that homebuyers often enter the mortgage process with confident expectations surrounding the rate they expect to receive, only to be disappointed when they can’t qualify for the best rates.

They inevitably always come back with one burning question: why? Why do homebuyers not qualify for the mortgage rate they thought they would?

This is a great and important question, but it can also be a hard one to answer, since there are so many factors in their application that can impact their qualification. Many homebuyers often get caught up in the process and forget about one or two details that the lender will take into account. As brokers, we can help answer that big “why” question by going through the key points lenders look at.

Here are some of the more common reasons why homebuyers who expect to qualify are later refused, or aren’t able to secure the best market rates.

Consumer debt
This is one of the biggest reasons homebuyers are not approved for the best mortgage rates. Having high debt payments, such as auto or credit card payments, can seriously hinder one’s borrowing power.

For example, a $400 car payment and just $10,000 of debt on a credit card can lower one’s borrowing power substantially, depending on their income and how it impacts their debt-to-income ratios, including the Gross Debt Service Ratio (GDSR) or Total Debt Service Ratio (TDSR). These ratios provide the lender with an idea of how the borrower is balancing their debts and income. The maximum GDS ratio must be under 32-39%, while the TDS ratio must be under 40-44%, depending on the lender.

Price increases
Homebuyers often frame their expectations based on the people they know who have recently bought homes, especially those with a similar profile. However, this doesn’t always create an accurate expectation of the market, especially in an environment like today where home prices have been rising rapidly.

For example, if your friend purchased a year ago, the cost of that home could already be up to 30% higher. As a result, your chances of being approved will be less than theirs, even if you have the same income and debt levels. The same applies to rates. What you qualified for last year may be different moving forward as rates continue to rise.

Irregular hours/inconsistent income
Lenders are more likely to use your income if you have guaranteed work hours. Even if you regularly work full-time hours, unless those hours are guaranteed, the lender may not be able to include your full income. The same applies to those who receive bonuses or commissions that supplement their income. The lender will most often use your two-year income average, or your most recent income year on your application.

Self-employment
Those who are self-employed generally have a higher gross income compared to their declared net income due to write-offs and how their taxes are filed. While write-offs may be desirable as a way to reduce income and associated taxes, they also reduce the amount of income that can be used on your mortgage application. This means you may not qualify for as much as you expected based on your gross income level.

Divorce and borrowing power
If you are divorced, your borrowing power can decrease based on alimony or child support payments. If you are making the payments, your debt-to-income ratio will increase, reducing your borrowing capacity. If you are receiving child support or alimony, lenders will want to ensure you are receiving that income consistently in order to include it as part of your income. If it is not being received consistently, there is a chance the lender will avoid using this income source.

Government income inconsistencies
Suppose your file is too heavily reliant on government-subsidized income sources, like a child tax benefit. In that case, your borrowing power will go down, as lenders won’t want the child tax benefit to represent too much of your income. Another way government-related income can be inconsistent for a lender is if they are looking at your prior years of income to determine your future loan repayment abilities. One example would be if you have Canadian Emergency Response Benefit (CERB) payments included as part of your income. Your lender will not likely use CERB income for qualification purposes, and will instead assess your income level as whatever it was less the CERB money. To best prepare for this scenario, ensure that your income is consistent and based entirely on your earnings rather than government subsidies.

No active credit
If you’ve had a previous consumer proposal or bankruptcy, you need to re-establish your credit profile before applying for a mortgage. It’s not just about the amount of time that has passed between declaring bankruptcy and applying for a mortgage. The most important objective should be rebuilding your creditworthiness, proving that you can be trusted with loan repayment.

Over-utilization of credit
You might think that you are well-prepared to apply for a mortgage because you’ve never missed a payment on your credit card. But, before doing so, you need to ensure that your cards are not maxed out. It might surprise you, but consistently maxing out your credit or building up large balances across multiple cards can drop your credit score even if you pay them off in time. Having a lower credit score typically means you won’t qualify for the best-available mortgage rates.

Active collections
If you have any active collections (debts owed on your cell phone or internet bills, for example), they need to be paid off before applying for a mortgage. If you pay them off in time, your credit should not be affected. But keep this in mind, as some people have active collections without even realizing it.

Credit profile issues
Lenders pore over credit profiles very carefully. If there are any inconsistencies, you will not be able to qualify for the mortgage rate you expected. Something else to watch out for is identity fraud. Regularly check your credit report for unfamiliar new accounts. If a fraudster opens a new account using your information, you may not be notified about it until you check your credit report.

When scanning your credit report, be on the lookout for any inconsistencies in personal information, such as the wrong birth date. If you notice any issues, you can file a dispute with the credit bureau. Make sure you check your credit report before any lenders do to ensure everything is up to date and accurate.

How brokers can help
Hopefully this list helps to answer the big “why” question borrowers ask when they can’t qualify for the best rates, and may change their outcome for the next time they apply.

Another thing to keep in mind is that, as brokers, we often have the tools and expertise at our disposal to assist borrowers with more complicated files. If the borrower can’t be qualified by the best-rate lender, competitive alternative lenders can sometimes also get the application done, particularly for borrowers with at least a 20% down payment.

No matter your situation, being over-prepared and knowing exactly how a lender will be scrutinizing your application will help greatly with the overall process and improve your odds of getting a better rate.

https://www.canadianmortgagetrends.com/2022/04/10-reasons-why-homebuyers-may-not-qualify-for-the-best-rates/

Courtesy First National Financial L.P.

Source: First National Financial L.P.

Source: First National Financial L.P.

My wife and I recently considered selling a small condo that we purchased in Montreal some eight years ago. The four-year fixed mortgage we have on the asset is of about $200,000, with an annual interest rate of 3.24 per cent.

In retrospect, going with a variable rate would have been a much better choice, but back then, securing a 3.24 per cent rate seemed attractive enough.

We knew that paying off the mortgage in full — a year and a half before it is up for renewal — would trigger some penalties, but when I inquired with Bank of Montreal what would be the exact amount, I was stunned to learn that the penalties would amount to $6,717.

You read it right, a penalty of almost $7,000 for breaking a small mortgage of $200,000 only 21 months before maturity.

How could that be? I asked. What I had in mind is a general rule of thumb that the penalty for breaking a mortgage early equals three months of interest. In our case, this would have cost us about $1,700 in fees. But $7,000?

I looked at my mortgage statement more carefully and realized that I was caught off guard when I renewed it a couple of years ago.

Our rate was indeed locked for four years at 3.24 per cent, but it was defined as BMO’s “posted rate” at the time we took the mortgage – 4.89 per cent – minus a “rate discount” of 1.65 per cent.

In a case like ours, as long as the mortgage matures according to plan, no special penalties will kick in. But if paid early, that “discount” that we received off the posted rate could actually turn out to be quite expensive.

By applying the “Interest Rate Differential” (IRD) — a somewhat complicated calculation that few borrowers fully understand — big banks charge massive penalties that could reach as much as five per cent of the loan (or principal) value.

To be fair, banks should receive some compensation when a client pays a mortgage in full before maturity. When a bank is initiating a mortgage, for example, providing a five-year fixed-rate loan, it’ll typically hedge (eliminate) its interest rate risk by getting into an opposite position to the one it provided to the customer.

If the mortgage is paid in full prematurely, say after three years, the bank will have to cover its hedged position it held against the mortgage. If interest rates change, this could expose the bank to a loss, and the penalties compensate the bank for that loss.

But the way in which Canadian banks are calculating these penalties results in excessive and unfair fees.

In Canada, the Big Six banks have multiple menus of mortgage rates. First, there are the so-called “posted rates.” These rates are typically inflated and should be considered as a sticker price for a new vehicle — a rate that no one should ever pay.

Currently, the Big Six banks’ posted rate for a five-year fixed mortgage is 4.79 per cent. The rate is significantly higher than the Government of Canada five-year bond yield which stands at 0.87 per cent — a good proxy for how much it costs the bank to finance the mortgages they provide.

Then, there are the big banks’ “special rates” or “best available rates” which are the competitive rates that you should aim to lock-in. The five-year fixed special rate at the Big Six is about 2.44 per cent now. This means that banks are willing to initiate five-year fixed mortgages at 235 basis points below their posted rates, which makes you wonder, why are posted rates so high?

If you do your research and negotiate, the big banks will offer you a competitive rate, far below their posted rate. But almost always, they will still link your discounted rate to the posted rate in a way that will trigger higher fees in case you break the mortgage early.

Robert McLister is a mortgage expert and editor at RATESDOTCA. He has been studying the Canadian mortgage market for years. “If you’re asking me, can you get a five-year fixed mortgage from a major bank without any chance of paying high penalties, the answer is definitely no,” he tells me in a phone interview.

There is a good reason why the five-year fixed rate — by far the most popular among Canadians — is so overblown. The IRD, the formula that generates high penalties for the banks, is larger, the higher the difference between the posted rate at the time a mortgage was initiated and the bank’s posted rate with remaining term (for example, two years fixed) when the mortgage is prepaid.

Since the majority of mortgages in Canada start off as five-year fixed, it’s beneficial for the banks to keep the five-year posted rate artificially high.

Mortgage Professionals Canada, the country’s mortgage industry association representing more than 13,000 individuals and more than 1,000 companies, confirms this observation.

In its recent publication, Annual State of the Residential Housing Market in Canada 2020, the association highlights the huge gap between the average posted five-year mortgage rate (4.95 per cent) and the average mortgage interest rate (2.25 per cent), and concludes: “It confirms that, increasingly, the banks’ posted rates are not being set in reference to the actual marketplace.”

Hence, according to Canada’s mortgage professionals, the big banks’ posted rate is basically a scheme.

Lack of competition is one of the reasons why this is possible, according to McLister. “In Canada, we have six big banks that control, directly or indirectly, over four out of five mortgage dollars through funding and direct origination. Most countries don’t have that level of concentration of the banking system,” he explains.

So what should you do the next time you need a mortgage?

The best way to avoid paying high prepayment penalties is to choose a variable-rate mortgage. Then, in most cases, banks would charge you just three months of interest for breaking a mortgage early, which is fair.

But in the current low interest rate environment many are rightfully tempted to lock in a five-year fixed rate. In that case, choose a lender that has just one set of discount rates. Tangerine (owned by Scotia) is one good example. That way, even if you break your mortgage early, penalties are going to be much more reasonable.

Amir Barnea
https://www.stcatharinesstandard.ca/ts/business/opinion/2021/09/04/taking-a-mortgage-avoid-linking-it-to-the-big-banks-posted-rate.html

Source: First National Financial L.P.

Committing to a mortgage for five long years exposes people to the most insidious aspect of residential financing: prepayment charges.

And when it comes to such charges – the penalties you pay come when you back out of your mortgage early – some lenders take a greater toll on your bank balance than others.

Big banks are usually the worst. Mortgage finance companies are often the best.

And these bank competitors want you to know it. More and more, smaller lenders are using their preferential penalty calculations as a selling point, as well they should.

This year I’ve seen lenders such as Equitable Bank, Manulife Bank of Canada, XMC Mortgage Corp., Merix Financial, CMLS Financial Ltd., RFA Mortgage Corp., First National Financial LP, and MCAP all go out of their way to step up marketing and educate consumers on how bad penalties from major banks can be. (Mind you, a few of these lenders also have “no-frills” mortgages with high penalties – for example, 3 per cent of principal. So watch out for those.)

WHAT IS A ‘FAIR-PENALTY LENDER?’

A fair-penalty lender calculates its standard prepayment charges, for lack of a better word, “fairly.”

It does so by comparing your actual mortgage rate to a rate equal to (or close to) what it charges new customers for a time frame similar to your remaining term.

Unlike Big Six banks, fair-penalty lenders don’t use arbitrarily inflated rates (“posted rates”) in their calculations. That only serves to drive up penalties.

So why doesn’t everyone get a mortgage with a fair penalty lender?

Well, because most people are conditioned to pay more for big bank financing. Among other things, they trust the brand, like the convenience or like knowing they can walk into a branch to talk to someone if there’s ever a problem (although, for most people, mortgage problems after closing aren’t too common). And the cost of that convenience is steep.

A SIMPLE EXAMPLE

Suppose you’re a major bank customer with a regular 3.19 per cent $300,000 five-year fixed mortgage that you got one year ago.

Now imagine you:

• Need to consolidate debt into your mortgage;
• Just found a new job in a different city and must sell and rent;
• Want to break and renegotiate to a lower rate;
• Have to break the loan early for some other reason – maybe because of a loss of income, divorce, inability to get a fair rate from your bank on a “port and increase” (that’s where you move your mortgage to a new property and increase the loan size), or inability to qualify for a port.

In these scenarios, one popular bank would charge you an interest rate differential (IRD) penalty of roughly $16,800 to exit your existing mortgage.

Compare that with just three months’ interest (about $2,400) at a “fair penalty lender.”

To put that another way, the extra $14,400 you’d fork over to the “less fair” lender would be like paying an 8.19-per-cent interest rate versus the 3.19 per cent. That’s astronomical. These days, determined mortgage shoppers do backflips to save even a 10th of a percentage point off their rate, let alone five whole points.

WAYS AROUND PENALTIES

Some big banks are kinder than others when it comes to helping you avoid prepayment pain. The better ones let you add money to your mortgage without penalty, offer early renewal options and have flexible portability rules.

But more often than not, you can find a similar mortgage from a fair-penalty lender for a comparable price or better – without the penalty shackles.

If you’re dead-set on a big-bank mortgage and want to lower your exposure to heinous fixed-rate penalties, consider a short-term fixed or variable rate instead – if it’s suitable for you. By suitable, I mean you have a tolerance for potentially higher rates sooner than five years and you have no problems getting approved for a mortgage.

These days, with so many people taking fixed rates because they’re cheaper than variable rates, banks stand to make a killing on prepayment charges. That’ll be especially true if recession hits and rates fall further. We come across people almost every week who’d love to refinance at today’s lower rates, but they can’t because their bank penalty is too harsh.

The time has come to heed this lesson as borrowers. Big-bank IRD penalties clearly overcompensate banks for the legitimate expenses they incur when a customer backs out of a mortgage early. The more that people demand fair penalties, the more pressure it’ll put on Canada’s six biggest lenders to change their methods.

Robert McLister
https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-big-banks-prepayment-charges-give-reason-to-consider-fair-penalty/