First Choice Financial Group
4255 Sherwoodtowne Blvd # 102 L4Z 1Y5 Mississauga, ON, Canada

MORTGAGE PENALTY CALCULATIONS...MORE IMPORTANT THAN THE INTEREST RATE! Why Isn't Anyone Talking About This? You bought a home....you need a mortgage....what's the first question you ask your bank or broker? "what's your best interest rate?". And the second question is usually, "what product should I choose?".... Almost no one asks about mortgage penalties or how they're calculated. After all, how often does anyone have to pay a penalty right? WRONG! The average mortgage consumer will have to deal with a penalty, which can add up to ridiculous amounts like.. $10,000, $20,000, $30,000 and more. This isn't some unknown bank or small lenders penalties...These are coming from the BIG SIX BANKS.!! Here's a little known stat...."Canadians change their mortgage every 3 years, on average". This means, there's a good chance we will be paying off our mortgage mid-term at some point in our lives. Ask anyone that's owned a home before. Chances are, they've had to deal with a mortgage penalty at some point...and for most of them, it's an embarrassing subject. After all, who wants to admit to being the victim? How To Protect Yourself... There are some things you can do to avoid these inflated penalties.... 1. Find out how your bank calculates their penalties. (This can actually be quite complicated...so if you need help understanding, please give me a call.) 2. Understand that penalties are NOT calculated the same by all banks or Financial Institutions. 3. There are better lenders out their....Lenders that DON'T use an inflated prepayment penalty formula to calculate your penalty. 4. Ask what the best product is to minimize your penalty. 5. Speak with an unbiased Mortgage Broker. 6. Remember, your bank can only ever offer or sell their own brand of products. It's impossible for them to give you unbiased advice. Should you know how a mortgage prepayment penalty is calculated? You better! It's the single largest expense that most of us will need to deal with. It's more important than the interest rate. I'll repeat....It's more important than the interest rate!

Variable Rate vs. Fixed Rate? Which Way to Go?... For almost a decade now, I've been recommending variable rate mortgages as the product of choice, and my clients have saved thousands of dollars over the years! It's been a great run....but now the strategy may have changed. Quick Variable Rate History... First you need to understand the history... Variable rates had lots of pluses. The penalty can never go over 3 months interest, and you have the option to lock into a Fixed rate at any time. Being in a Variable meant paying lower rates! In fact, the difference compared with Fixed rates, ranged between 1% and 3%. This translated to several thousands less in interest charges every year. My rule for choosing Variable over Fixed was simple.... we needed to see at least a .75% - 1% spread. It used to be easy, but today that spread is gone. Variable rate pricing is not very attractive right now. Variable rate's used to be priced anywhere from prime less .50% to .75% and as low as 1.00% below Prime. (Prime rate is 2.70% today) Best Variable rate discount today is around Prime less .50% or 2.20%. Compare that with 5 year Fixed rates in the range of 2.45% to 2.55%. The savings by choosing variable is only about .25% to .35%....with the potential for rate increases over the next 5 years. Today, the landscape has changed and it's time to consider other strategies. With the spread between a 5yr Fixed and 5yr Variable being almost nil, it's important to explore all options carefully. Not all mortgages are alike. The fine print can cost you thousands of dollars. Choosing the wrong term, the wrong product and the wrong lender or bank can end up costing you thousands. So be sure to consult with an unbiased broker like myself, that doesn't promote only one banks set of products.

Going From Variable to Fixed: What You Should Be Aware Of! You can usually find a variable rate mortgage for at least half a point lower than any fixed rate mortgage, but choosing a variable rate mortgage makes you subject to unexpected rate hikes. Many times people decide to switch from a variable rate to a fixed rate mortgage before their term is up. Here are a few common mistakes that are made when switching and how you can avoid them. Locking in Too Late: Most people do...n't have time to constantly analyze mortgage rates, so by the time they get wind of the Bank of Canada's mortgage rate increase, it's already too late. Fixed rate mortgages are based on prices in the bond market, and bond trader's start raising rates before the Bank of Canada has touched mortgage rates. You might assume that this means you can just watch bond yields in order to figure out where mortgage rates are headed, but this isn't so simple either. Bond rates fluctuate greatly, and only an experienced trader will be able to identify the patterns that point to mortgage rate hikes. Many times people lock into their mortgage rate after prices have already increased, at a percentage higher than their variable rate would have been. Conversion Rates - Not Your Best Bet: When you're converting from a variable mortgage, your lender is unlikely to give you best rate on your fixed mortgage. Conversion rates are normally one-fifth to one-half percent higher than those rates given to new customers. And negotiating a better rate is unlikely, as lenders know the penalties you'll receive for switching mid-cycle are too great for you to consider leaving for another lender. Other Things to be Aware of: When switching from a variable rate mortgage to a fixed rate, your monthly payment will usually increase. You may also have to pay penalty fees in order to lock in or be forced to lock in with major refinance restrictions. Variable rate mortgages can be a great thing, but choosing one with the idea that you'll switch to a fixed rate mortgage in the near future is something to do cautiously.

U.S. Fed Rate Hike Doesn't Mean Bank of Canada Rate Hike! Last month, The U.S. Federal Reserve Bank Chairperson, Janet Yellen, raised rates for the first time since 2006. Historically, Canada follows the U.S. with rate movement. However times are changing...Don't expect Canada to follow the U.S. move anytime soon. Divergence. That's the new buzz-word. Bank of Canada Governor, Stephen Poloz said, " Usually you think of the Canadian economy following the U.S. economy fairly ...closely. This will be one of those places where it really doesn't." "But as a macro statement, there will be a divergence there. We're already seeing it, and so you should expect a divergence in policy too," he said. Where is Canada Going With Interest Rates? We are still very much in bed with the U.S. when it comes to trade and business...however, we've gone our own for quite some time now when it comes to interest rates. We were one of the few countries in the world NOT affected by the U.S. sub-prime mortgage crisis of 2008. In 2010, the Bank of Canada raised the rates with three 0.25% rate hikes. Most other countries were not changing them at that time. Then in 2015, the BOC lowered the rate with two 0.25% rate cuts (of course the Big Six Banks showed their true greed and didn't pass on that savings and only cur rates by 0.30%...but that's another story). My message and advice....don't pay too much attention to the media headlines saying rates have changed or moved. There really hasn't been much movement in the last 7 years....and it's probably not going to change much in the next few years. Be happy....Interest rates are ridiculously low today...so enjoy!