Thursday, September 22, 2011
Inflation Hedge Strategy at Work
Here's the Inflation Hedge Strategy at work and how an un-managed mortgage compares to a managed mortgage from myself.
This strategy will save you thousands of dollars and shave years off your mortgage.
Most importantly, this strategy, avoids a potentially large payment shock at the end of your term.
The key to this, is to have someone manage your mortgage for you. Typically your bank will not provide this extra service and you'll only hear from them at the end of the term to renew. With me, at no cost, I will monitor your mortgage and implement this simple strategy to save you money.
Call or email me today if you need further explanation or would like to implement this to your mortgage! 604-786-9099 christos@gitersos.com
Here's the first video I created on this excellent strategy http://gitersos.blogspot.com/2011/09/inflation-hedge-strategy.html
This strategy will save you thousands of dollars and shave years off your mortgage.
Most importantly, this strategy, avoids a potentially large payment shock at the end of your term.
The key to this, is to have someone manage your mortgage for you. Typically your bank will not provide this extra service and you'll only hear from them at the end of the term to renew. With me, at no cost, I will monitor your mortgage and implement this simple strategy to save you money.
Call or email me today if you need further explanation or would like to implement this to your mortgage! 604-786-9099 christos@gitersos.com
Here's the first video I created on this excellent strategy http://gitersos.blogspot.com/2011/09/inflation-hedge-strategy.html
Wednesday, September 21, 2011
Influence and Association
Here I'm quoting one of America's top business philosphers Jim Rohn.
I truly beleive in a lot of what he says and this is no different. Brings true meaning to, you are who your friends are.
I truly beleive in a lot of what he says and this is no different. Brings true meaning to, you are who your friends are.
Purchase plus improvements
-This program is with all 3 insurers. The amount allowed for improvements is typically 10% -20% of the purchase price, or up to $40,000 maximum. The money is to be used for “improvements” or “upgrades”, not necessary repairs like leaks or structure issues. Also must be for something that adds value to the home, not a chattel like appliances.
-You need to get quotes for the cost of the improvements that the client wishes to complete. Add the amount of the quote/s to the purchase price, and this becomes the new purchase price. The down payment is now based on this new higher purchase price as well.
-The mortgage is funded in order to purchase the home, but the money to be used for improvements is held at the solicitor’s office until the work is complete.
-The work can be done by the client or a company/contractor, but client labor is not something that can be reimbursed for. If a client does the work him or herself, only the cost of the materials is released. If a contractor or company does the work, send us the invoice and we can pay them directly for the full amount at the end.
-An inspection report from an appraiser is required when all is done so we can confirm that the said work was completed.
-If the final cost ended up being less than expected, the left over money is applied back against the mortgage.
-You need to get quotes for the cost of the improvements that the client wishes to complete. Add the amount of the quote/s to the purchase price, and this becomes the new purchase price. The down payment is now based on this new higher purchase price as well.
-The mortgage is funded in order to purchase the home, but the money to be used for improvements is held at the solicitor’s office until the work is complete.
-The work can be done by the client or a company/contractor, but client labor is not something that can be reimbursed for. If a client does the work him or herself, only the cost of the materials is released. If a contractor or company does the work, send us the invoice and we can pay them directly for the full amount at the end.
-An inspection report from an appraiser is required when all is done so we can confirm that the said work was completed.
-If the final cost ended up being less than expected, the left over money is applied back against the mortgage.
Wednesday, September 14, 2011
What style of variable should I take? Open, closed, or LOC
Open? Closed? Line of Credit?
I get asked often whether or not I should go with an open variable, closed variable or if I should get a line of credit.
This is what I say.
The only time you would want to consider taking an open variable mortgage, meaning you have the ability to pay the mortgage out at anytime without penalty, is when you know for sure that you WILL be paying off your mortgage within the first 10 or so months.
In order to have the abililty to pay out your mortgage without penalty the lender or bank will charge you an increased amount over prime as opposed to a discount off of prime. This could be a large spread of over 1%.
If you kept your mortgage for more than the 10 months, it would be cheaper, interest wise, to pay the penalty on the mortgage, which is a 3 month interest penalty. This is cheaper than paying the premium on Prime on an open for the 10 months.
Every case is of course different and this is why we talk about planning and strategy from the get go.
Now when people talk about a line of credit there's one one important thing that needs to be said first. You can only obtain a line of creit with 20% or more equity in your home. If you have less than 20% equity, you can NOT obtain a LOC.
I also say to people, why would you want a secured line of credit at say Prime +.50 or higher, when you can have the same amount of money at prime -.50 or deeper today? You'd be paying 1% more for the priviledge of that LOC.
Well, I guess the interest only payments may be enticing, however, in my opinon, and I beleive debt is not good and should be cleared, paying that little bit extra and paying towards principal at a much lower rate is more realistic and a huge cost savings!
Of course though, everyone's situation is different and there may be a reason why you need a LOC attached to your mortgage. One being, you know a large sum of money is coming in. why pay a penalty on that portion of the mortgage your paying out.
Everyone needs to find a plan and strategy to make your mortgage work for you and not for the lender. This is what we'll do together!!
I get asked often whether or not I should go with an open variable, closed variable or if I should get a line of credit.
This is what I say.
The only time you would want to consider taking an open variable mortgage, meaning you have the ability to pay the mortgage out at anytime without penalty, is when you know for sure that you WILL be paying off your mortgage within the first 10 or so months.
In order to have the abililty to pay out your mortgage without penalty the lender or bank will charge you an increased amount over prime as opposed to a discount off of prime. This could be a large spread of over 1%.
If you kept your mortgage for more than the 10 months, it would be cheaper, interest wise, to pay the penalty on the mortgage, which is a 3 month interest penalty. This is cheaper than paying the premium on Prime on an open for the 10 months.
Every case is of course different and this is why we talk about planning and strategy from the get go.
Now when people talk about a line of credit there's one one important thing that needs to be said first. You can only obtain a line of creit with 20% or more equity in your home. If you have less than 20% equity, you can NOT obtain a LOC.
I also say to people, why would you want a secured line of credit at say Prime +.50 or higher, when you can have the same amount of money at prime -.50 or deeper today? You'd be paying 1% more for the priviledge of that LOC.
Well, I guess the interest only payments may be enticing, however, in my opinon, and I beleive debt is not good and should be cleared, paying that little bit extra and paying towards principal at a much lower rate is more realistic and a huge cost savings!
Of course though, everyone's situation is different and there may be a reason why you need a LOC attached to your mortgage. One being, you know a large sum of money is coming in. why pay a penalty on that portion of the mortgage your paying out.
Everyone needs to find a plan and strategy to make your mortgage work for you and not for the lender. This is what we'll do together!!
Friday, September 9, 2011
More tightening of mortgage rules? Why?
Here's an article I read this morning in the Financial Post talking about tightening up mortgage rules, again. When are these people going to understand that it's not the mortgages that are causing the debt issue, it's the unsecure debt loads that Canadians have. I see it everyday in this field pulling credit bureaus.
Leave the housing market alone. Without a strong housing market the economy could fall apart. There are so many people that are involved with one transaction. And I'm sure, especially in BC, they would hate to stop losing revenue on the way overtaxed Property Transfer Tax.
David Pett Sep 8, 2011 – 11:22 AM ET | Last Updated: Sep 8, 2011 5:47 PM ET
With Canadian interest rates now on hold for some time to come, the government may move to tighten mortgage rules again to keep the already hot housing market from bubbling over, says the chief economist of Canada’s biggest bank.
“As we go forward in an environment of lower rates for longer now, we may see another round of mortgage rule tightening,” said Craig Wright, chief economist at RBC Financial Group during a panel discussion on Canada’s economy at the Economic Club of Canada.
Following Wednesday’s decision by the Bank of Canada to keep its key lending rate unchanged at 1%, it is now widely expected that interest rates will stay at uncommonly low levels well into 2012 or longer if the global economy continues to deteriorate.
Mr. Wright believes that Canada’s fast-growing housing market, which resulted in an impressive 6% increase in building permits last month, will start to slow in the months ahead.
Several factors boosting mortgage activity in the first half of the year, including the HST in Ontario and B.C., are becoming less important catalysts, he said, while consumer confidence about the economy and overall affordability are growing headwinds.
In a cooling scenario, he said it is unlikely that more stringent mortgage rules will be forthcoming. However, if a moderate slowdown doesn’t take place as expected, it becomes increasingly possible that regulatory changes, including shorter amortization periods and an increase in the amount of mortgage insurance required will be needed in the future in order to curb a growing appetite for credit.
“Lower rates make debt more attractive but that is countered by the confidence shock that we are all feeling towards the economy,” he said. “So the jury is still out but [Ottawa] may end up feeling the need to tighten a little bit further.”
Part of the run-up that Canada has seen in personal debt levels over the past decade has largely been driven by mortgage growth that has coincided with easier access to credit.
In more recent years, concerns about the rising levels of household credit has prompted Ottawa to tighten its mortgage rules and this past January Finance Minister Jim Flaherty announced three new changes:
The first reduced the maximum amortization period to 30 years from 35 years for government-backed insured mortgages with loan-to-value ratios of more than 80%; the second lowered the maximum amount Canadians can borrow in refinancing their mortgages to 85% from 90% of the value of their homes; and the last adjustment withdrew government insurance backing on lines of credit secured by homes.
Mr. Wright points out that even with these tighter measures, mortgage rules are still much looser than they were ten years ago.
He noted that the required downpayment used to be 10%, compared to 5% now, while amortization was previously a maximum of 25 years. Furthermore, the qualification for mortgage insurance had been 25% and is 20% today.
“There is still, if need be, some room to move back to where we were,” he said. “We may not need to go back there, but there is an option if we don’t see any moderation in debt going forward.”
While Canada’s mortgage rules may be looser than was previously the case, they have remained much more stringent than U.S. regulations governing home loans, said Sherry Cooper, chief economist at BMO Capital Markets. Because of that, she considers Canada’s housing market to be in much better shape than it would be otherwise.
“Not only did Canada dodge the sub-prime problem, but when you look at the aggregate of equity in homes among Canadian households it is much higher than in the United States,” she said during the panel discussion.
She is also encouraged by the fact that Canada’s home-ownership ratio is much higher than it is south of the border and statistics that show Canadians typically pay off their mortgages prior to retirement.
While there has been an inordinate rise in house prices in some regions of the country, notably in Vancouver and to a much smaller degree Toronto and Calgary, which already seen a correction, she doesn’t believe a massive housing bubble is going to burst, largely because much of the demand for Canadian homes is coming from foreign investors who aren’t reliant on mortgages to make their purchases.
“As anyone who has been involved in the housing market, there seems to be tremendous interest in our markets by foreigners who want to diversify their investment and see Canadian real estate as a positive and affordable — believe or not — opportunity,” she said.
Leave the housing market alone. Without a strong housing market the economy could fall apart. There are so many people that are involved with one transaction. And I'm sure, especially in BC, they would hate to stop losing revenue on the way overtaxed Property Transfer Tax.
David Pett Sep 8, 2011 – 11:22 AM ET | Last Updated: Sep 8, 2011 5:47 PM ET
With Canadian interest rates now on hold for some time to come, the government may move to tighten mortgage rules again to keep the already hot housing market from bubbling over, says the chief economist of Canada’s biggest bank.
“As we go forward in an environment of lower rates for longer now, we may see another round of mortgage rule tightening,” said Craig Wright, chief economist at RBC Financial Group during a panel discussion on Canada’s economy at the Economic Club of Canada.
Following Wednesday’s decision by the Bank of Canada to keep its key lending rate unchanged at 1%, it is now widely expected that interest rates will stay at uncommonly low levels well into 2012 or longer if the global economy continues to deteriorate.
Mr. Wright believes that Canada’s fast-growing housing market, which resulted in an impressive 6% increase in building permits last month, will start to slow in the months ahead.
Several factors boosting mortgage activity in the first half of the year, including the HST in Ontario and B.C., are becoming less important catalysts, he said, while consumer confidence about the economy and overall affordability are growing headwinds.
In a cooling scenario, he said it is unlikely that more stringent mortgage rules will be forthcoming. However, if a moderate slowdown doesn’t take place as expected, it becomes increasingly possible that regulatory changes, including shorter amortization periods and an increase in the amount of mortgage insurance required will be needed in the future in order to curb a growing appetite for credit.
“Lower rates make debt more attractive but that is countered by the confidence shock that we are all feeling towards the economy,” he said. “So the jury is still out but [Ottawa] may end up feeling the need to tighten a little bit further.”
Part of the run-up that Canada has seen in personal debt levels over the past decade has largely been driven by mortgage growth that has coincided with easier access to credit.
In more recent years, concerns about the rising levels of household credit has prompted Ottawa to tighten its mortgage rules and this past January Finance Minister Jim Flaherty announced three new changes:
The first reduced the maximum amortization period to 30 years from 35 years for government-backed insured mortgages with loan-to-value ratios of more than 80%; the second lowered the maximum amount Canadians can borrow in refinancing their mortgages to 85% from 90% of the value of their homes; and the last adjustment withdrew government insurance backing on lines of credit secured by homes.
Mr. Wright points out that even with these tighter measures, mortgage rules are still much looser than they were ten years ago.
He noted that the required downpayment used to be 10%, compared to 5% now, while amortization was previously a maximum of 25 years. Furthermore, the qualification for mortgage insurance had been 25% and is 20% today.
“There is still, if need be, some room to move back to where we were,” he said. “We may not need to go back there, but there is an option if we don’t see any moderation in debt going forward.”
While Canada’s mortgage rules may be looser than was previously the case, they have remained much more stringent than U.S. regulations governing home loans, said Sherry Cooper, chief economist at BMO Capital Markets. Because of that, she considers Canada’s housing market to be in much better shape than it would be otherwise.
“Not only did Canada dodge the sub-prime problem, but when you look at the aggregate of equity in homes among Canadian households it is much higher than in the United States,” she said during the panel discussion.
She is also encouraged by the fact that Canada’s home-ownership ratio is much higher than it is south of the border and statistics that show Canadians typically pay off their mortgages prior to retirement.
While there has been an inordinate rise in house prices in some regions of the country, notably in Vancouver and to a much smaller degree Toronto and Calgary, which already seen a correction, she doesn’t believe a massive housing bubble is going to burst, largely because much of the demand for Canadian homes is coming from foreign investors who aren’t reliant on mortgages to make their purchases.
“As anyone who has been involved in the housing market, there seems to be tremendous interest in our markets by foreigners who want to diversify their investment and see Canadian real estate as a positive and affordable — believe or not — opportunity,” she said.
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