A glossary of crucial terms for first-time buyers and homeowners in Canada.


What’s a mortgage broker?

A mortgage broker is a licensed mortgage specialist who can tell you what’s available in the marketplace from banks and lenders across Canada and can guide you through the mortgage process. Mortgage brokers are also able to pass volume discounts directly on to you because of the high quantities of mortgage products they acquire. 

Tom Hogg, a mortgage agent at The Mortgage Centre, in Mississauga, Ont., describes his job as educating the consumer on exactly what they’re signing. “My role is to create a buffet of products and help them choose,” says Mr. Hogg. “We do a needs assessment and make sure the clients clearly understand the flexibility and features of the mortgage that will enable them to get rid of this albatross as soon as possible.”

Mortgage brokers are an origination service. That means that the  mortgage broker originates your mortgage financing for you, but a bank or financial institution provides the money and services your mortgage after the closing.    

What’s the difference between a mortgage broker and a mortgage agent? 

Mortgage brokers can have agents working underneath them. Each agent has to work under the license of a mortgage broker. The brokerage is accountable for the agents’ work. 
How are mortgage brokers paid?

Their commission is paid by the bank or lender providing the mortgage product based on how much money the consumer borrows. Mortgage brokers aren’t compensated on the interest the bank makes, so they don’t receive a higher commission if the client chooses a higher rate. It varies a bit, but the commission generally works out to an average of $80 per $10,000 of the consumer’s loan.  

What’s a fixed mortgage rate?

‘Fixed’ means your interest rate and regular payments will be the same for the duration of your mortgage term, whether rates rise or fall. It offers you stability and the least financial anxiety. But if interest rates drop significantly, you may be stuck paying a higher rate for the duration of your term, depending on the flexibility and features of your mortgage. 

What’s a variable mortgage rate? 

Your mortgage payments will go up or down with the fluctuations in the ‘prime rate’, which is the market interest rate. The danger here is that a significant increase in the ‘prime rate’ increases your interest payable as well. But if it decreases, you’ll pay less.
What‘s better? Fixed or variable?

While over 60 percent of Canadians opted for a fixed mortgage rate in 2011, variable rates tend to be cheaper over time. Conversely, you may sleep better knowing you’re not subject to interest rate fluctuations. Making the right choice depends largely on the current rates at the time you’re taking out your mortgage. When interest rates are low and aren’t expected to drop further, locking into a fixed rate may be your best option. However, if experts are projecting that interest rates may fall, you’re probably better off with a variable rate, especially if there’s a significant difference between the fixed and variable rates.  

What’s a closed mortgage rate? 

A closed mortgage can be fixed or variable. Closed mortgage rates are popular because they’re lower than open mortgages rates but unlike an open mortgage, you’re restricted on how much principal you can pay down annually and there will be a penalty to pay a closed mortgage out early. Terms range from six months to 10 years. Despite their low rates and relative stability, there are disadvantages so read the fine print before signing.

“Some banks have introduced fully closed mortgages where during the term, other than an arms-length sale [meaning the sale can’t be to a friend or relative] of the home, you can’t get out of the contract,” warns Tom Hogg, a mortgage agent at The Mortgage Centre in Mississauga, Ont. “Even if you win the lottery and want to pay them out, you can’t. A product like that is mortgage jail.”

What’s an open mortgage rate?

An open mortgage can also be fixed or variable. The interest rate will be higher than for a closed mortgage but it’s more flexible. Generally, you can pay an open mortgage off anytime or make additional payments without penalties. Terms range from six months to five years so you can’t lock in for as long as a closed mortgage. If you want to get rid of your mortgage quickly, or think you may be selling or moving in the near future, this is a good option. 

Why are mortgage rates so different? 

Rates vary according to institutions. All of the banks have completely different products which is why their pricing is different, explains Tom Hogg, a mortgage agent at The Mortgage Centre in Mississauga, Ont. 

“The price you pay depends on what features you want on that mortgage,” says Mr. Hogg. “Prepayment features are huge. The ability to give additional lump sums of money as often as you can is important because it all goes to the principal. You can get a 2.99 five-year fixed but it’s only available on a 25 year max amortization, has limited prepayment privileges, it’s closed to term so there are issues with it. The highest is going to have all the bells and whistles but you may not need all those features. Once you understand each rate and each product, you’ll choose what’s best for you – probably somewhere in the middle.”

What is CMHC?

Canada Mortgage and Housing Corporation (CMHC) is a Crown corporation that mainly provides mortgage loan insurance to residential home buyers. It was originally set up in 1946 to arrange post-war housing for veterans. Today it helps Canadians who can’t easily afford buying a house through their mortgage default insurance program. 

What is mortgage default insurance? 

It’s a type of mortgage insurance that’s mandatory in Canada if your down payment for a residential property is less than 20 per cent. The major provider of this insurance is the Canada Mortgage and Housing Corporation. 

The insurance costs you between 1.75 per cent to  2.95 per cent of your mortgage amount and you have to buy and pay for this insurance on top of your mortgage. It protects the banks and the money lenders if a home owner defaults on their mortgage but doesn’t protect the homeowner. However, lenders do offer lower mortgage rates because their risk is decreased.



November 2013

November 2013 Market Update

October was a good month. The sun was shining, the Canucks had their best 7-game road trip in franchise history, and the housing market was strong. So far this fall, it seems as though house prices and sales have moved into a healthy balanced market in most parts of the province. Well-priced product sells while overpriced product sits. It's the way a market should be.


Moving into November, a few things from the past month have been interesting vis-à-vis the BC housing market. Firstly, the US government shutdown and debt ceiling crisis had a negligible effect on both the BC housing market and financial markets in general. It seems as though most people have already priced US government dysfunction into their decision-making process. So, barring a black-swan event, it seems as though these US crises' are unlikely to significantly swing the housing market in BC one way or another.


Secondly, the Bank of Canada has eased its language on raising rates and is now taking a more neutral stance, stating that the market will decide when the bank should raise interest rates. For the past year or so, most analysts had predicted that rates would be rising sooner rather than later. This sentiment has resulted in increased sales as buyers moved into the market ahead of an expected rate increase. With rates now stable, buyers will take their time, but will also still be in the market for a longer period.


Thirdly, while the US economy has had an anemic recovery from the 2008 recession, things are still improving. This is being led by the US real estate market, which is finally recovering from its 35-month peak-to-trough period which started in 2006. With an improving economy, comes improved consumer confidence, as Canadians hear more and more about positive trends south of the border.


While we likely won't see the exponential growth in prices that we experienced from 2009-2010, the factors described above imply that BC's real estate market should remain relatively stable for the foreseeable future.


Finally, on another note, Macdonald Realty has been producing a great quarterly magazine showcasing BC's finest real estate. If you're interested in having your home profiled in this publication, please contact me at the address below. You can find a link to the first 3 digital editions of the magazine here:



(Click chart to see larger image)
*This communication is not intended to cause or induce breach of an existing agency agreement.

*Although this information has been received from sources deemed reliable, we assume no responsibility for its accuracy, and without offering advice, make this submission to prior sale or lease, change in price or terms, and withdrawal without notice.



When the time is right for you to buy a home, make sure you are financially fit and eligible for the best possible mortgage rates. Here are our top five tips to boost your “financial fitness”:


1. Whip it

Whip your credit rating into shape: pay your bills on time… every time. Keep your oldest credit card for its history, and make sure it’s always paid on time. Try not to apply for any new credit. 


2. Follow the 33% rule


Never run up a credit card or line of credit past 33% of its available limit. If you’ve got a $3,000 limit, then $1,000 is your absolute ceiling. 


3. Cash is king


Gather up the maximum downpayment possible. The more money you put down on a home, the better.


4. Be prepared


Put together a file folder with the following: pay stubs, or proof of self-employment income, list of debts and assets, and current bank statements. We can advise what you’ll need. 


5. Start a dialogue


Talk to a mortgage broker & Realtor about your plans. Find out if you can pre-qualify, and ask about how you might qualify for the best possible rate.


The process of qualifying for a mortgage begins long before you decide to buy a home! But if you make a plan to improve your financial fitness… you’ll have no shortage of lenders willing to compete for your business.




If you don't own one already, you may be tempted to purchase a widescreen digital television to enjoy your favourite movies, shows and sports programs. However, it can be difficult to select the right screen size, especially if you've been accustomed to viewing a TV with a traditional 4:3 screen.


When it comes to size, there are many factors that come into play, such as screen resolution and personal preference. However, the last thing you want is to purchase an HDTV that is too small for the room, or so big that it dominates the space.


Here's a tip:


The rule of thumb is to take the distance you'll be sitting from the television and multiple by five to get the screen size you need. So if you'll be sitting eight feet away, you'll want to look at HDTVs with screens that are in the 35-45 inch range.


A good electronics dealer can help you make the best choice.



Balanced conditions continue in the Greater Vancouver housing market

Home buyer and seller activity continues to mirror historical averages in the Greater Vancouver housing market. These trends have helped keep the region in a balanced state for the last nine months.

The Real Estate Board of Greater Vancouver reports that residential property sales in Greater Vancouver reached 2,661 on the Multiple Listing Service® (MLS®) in October 2013. This is a 37.8 per cent increase compared to the 1,931 sales recorded in October 2012, and a 7.2 per cent increase from the 2,483 sales recorded in September 2013.

New listings for attached, detached and apartment properties in Greater Vancouver totaled 4,315 in October 2013. This represents a 0.2 per cent decline from the 4,323 new listings reported in October 2012, and a decrease of 14.2 per cent compared to the 5,030 new listings reported in September of this year.

Last month’s sales were 2.8 per cent above the 10-year sales average for the month, while new listings for the month were 1.9 per cent below the 10-year average.

“We continue to see fairly typical activity when it comes to monthly home sale and listing totals,” Sandra Wyant, REBGV president said. “Today’s activity is helping to keep us in balanced market territory, which means that prices tend to experience minimal fluctuation.”

The total number of properties currently listed for sale on the MLS® in Greater Vancouver is 15,257, a decline of 12.2 per cent compared to this time last year, and a decline of 5.3 per cent compared to September 2013.

The sales-to-active-listings ratio is currently at 17.4 per cent in Greater Vancouver.

The MLS® Home Price Index composite benchmark price for all residential properties in Greater Vancouver is $600,700. This represents a 0.5 per cent decline compared to this time last year.

Sales of detached properties reached 1,067 in October 2013, an increase of 35.1 per cent from the 790 detached sales recorded in October 2012 and a 9.5 per cent increase from the 974 units sold in October 2011. The benchmark price for detached properties decreased 0.5 per cent from October 2012 to $922,600.

Sales of apartment properties reached 1,098 in October 2013, an increase of 36.7 per cent compared to the 803 apartment sales recorded in October 2012, and an increase of 14.6 per cent compared to the 958 sales in October 2011. The benchmark price of an apartment property decreased 0.9 per cent from October 2012 to $365,600.

Attached property sales totaled 496, an increase of 46.7 per cent compared to the 338 attached property sales recorded in 2012 and a 29.8 per cent increase compared to the 382 attached property sales recorded in October 2011. The benchmark price of an attached property is $458,000, which is virtually unchanged from October 2012.



What's one of the most important rooms in your home?


When it comes to selling your property quickly, and for the best price, the answer is clearly the kitchen. In fact, one of the most common explanations a particular buyer gives for not making an offer is, "I liked the house, but I wasn't too keen on the kitchen." That doesn't mean you must do a major renovation. However, you should do what you can to make the kitchen as attractive as possible to buyers. Here are some ideas:

First, clear the countertops. Put away the toaster and other items. You want to make the entire countertop area seem as spacious as possible. 


If the cabinetry is old, you can spruce it up by installing new knobs, handles and other hardware. A fresh coat of paint on the walls and ceiling can also make the kitchen look like it has had a major renovation – and it will only cost you a few hundred dollars. According to an article on the website, "The fastest, most inexpensive kitchen updates include painting and new cabinet hardware."

Replacing the countertops is a more expensive renovation, but it may be worth it if the current counters are old and worn. 


Finally, when preparing your kitchen for a viewing, make sure it's clean and tidy. The garbage and recycling bins should be empty. Buyers will open cabinets so make sure items on shelves are neatly organized with the front
labels facing forward. 


There are many other ways to make the most important room in your home look great to potential buyers. Call today for more ideas.

Reciprocity Logo The data relating to real estate on this website comes in part from the MLS® Reciprocity program of either the Greater Vancouver REALTORS® (GVR), the Fraser Valley Real Estate Board (FVREB) or the Chilliwack and District Real Estate Board (CADREB). Real estate listings held by participating real estate firms are marked with the MLS® logo and detailed information about the listing includes the name of the listing agent. This representation is based in whole or part on data generated by either the GVR, the FVREB or the CADREB which assumes no responsibility for its accuracy. The materials contained on this page may not be reproduced without the express written consent of either the GVR, the FVREB or the CADREB.