Mortgages

It pays to check the fine print on low-rate offerings

2012-01-19T15:22:00.000-08:00

Here's an article I read that makes a lot of sense.

It was a top news story last week. One of the major banks offered the lowest five-year fixed interest rate in Canadian history at 2.99 per cent. As a licensed mortgage agent, I had to quickly attain as much information as I could on the actual contract before I could recommend it to my clients. You know the old saying “if it is too good to be true …”

My research revealed that many of these low-rate mortgages have such restrictive contracts that they could get you into trouble down the road. Before you sign up for that great rate, make sure you are not signing up for something that could handcuff you financially down the road. You need a mortgage that will be flexible should you experience life changes. I have seen many clients brought to the financial brink because of the penalties and restrictions written into their mortgage contract.

Work with an expert and check under the hood. Not all mortgage contracts are created equal.

One of the scariest mortgages created in the last two years by the major banks is what mortgage broker’s are nicknaming the “mousetrap mortgage.” Mousetrap mortgages are so named because once you are in, you are trapped. The cheese is the initial great rate, but the trap comes in the form of extremely restrictive charges in the contract. I call them Hotel California mortgages because “you can check out anytime you like, but you can never leave…”. The technical term for a “mousetrap mortgage” is a collateral mortgage.

Unlike the traditional mortgage, which uses the property as security and will lend out up to 95 per cent of the home’s value, the collateral mortgage is a loan that is attached to a promissory note and is backed by the collateral security of a mortgage on a property. Because the security on a collateral mortgage is a promissory note with a lien on the property, the lender is free to register as much as 125 per cent of the value of the property, even though they are only advancing maximum 80 per cent to the borrower.

It is similar to a revolving line of credit allowing borrowers to increase their loan without the inconvenience or cost of refinancing. How nice. You have an amazing rate for the next five years and you can conveniently refinance anytime.

The major caveat with collateral mortgage is that the lender is free to change the interest rate on the contract under certain circumstances. Something as small as a missed or late payment can trigger an interest-rate increase. Some contracts are so restrictive that changes to your debt held with other institutions can also trigger an increase in rates of your mortgage contract.

One of these low-rate mortgages states that you must remain with the lender for the five years of the contract. As long as you stay with them you can refinance, and they even state that if you move, you can take their mortgage with you to the new property. But what are the conditions? Will a refinance with them trigger a change of rate? Will a port of your mortgage to a new property trigger a rate increase? What happens to your mortgage if you need to get a car loan with another lender? What happens at the end of the contract? Are there penalties if you don’t renew with them? These questions need to be asked.

It is imperative that you ask the right questions, get independent legal advice and have a licensed mortgage agent thoroughly go through the contract with you in detail. Your mortgage agent should be able to answer your questions by referring directly to the contract. While the big banks will offer to cover legal fees if you use their clearing house, I would suggest contacting your lawyer and paying to have them take a second look.

For most people, sticking it out for five years is not a big deal; especially at 2.99 per cent. But you never know what life might throw at you. You may experience a divorce, or get a job transfer or need to refinance so you need to be very clear about what will happen to your mortgage should you need to make changes. Remember costly surprises will wipe out a lot more than a few points of interest savings.

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We never want to imagine a change in our lives negatively that would make us need to redo the mortgage in the less than five years, however, in my 7 years in doing mortgages, it's very rare that a mortgage goes to term due to something in life coming up. Just today I had to turn away 2 people asking for a second mortgage (to buy a thriving business and to pay a lawyer for a divorce) and both were denied due to a collateral charge registered on their mortgage eating up any available equity. Life changes!

Locking in your legacy

2012-01-17T09:39:00.001-08:00

Small read, yet good....

If you are going to leave a legacy that impacts people, there is something that you are going to have to come to grips with:

You are going to die.

What? What kind of motivational tool is that? Real inspiring!

Actually, it is. Our mortality may perhaps be the ultimate inspiration and motivation! If we lived on this earth eternally, we could be procrastinators extraordinaire! We would never have to get anything done because there would always be tomorrow. But alas, we pass on and all we leave are the memories and the lives of others we affected while we were here. Sounds gloomy? In actuality, it is exciting! You see, this gives us purpose—and a deadline (pun intended).

We can choose how we will live on in the hearts and memories of others. We do this by purposing to live NOW in a way that makes change happen not only within us but also those around us.

What kind of legacy will you leave? How will your family and friends remember you? How will you leave your descendants in the following areas? Give some thought to them and make some changes. In doing so, you will begin to lock in your legacy.

Below are some subject areas that that I hope will cause you to think—really think—about how you can leave a legacy.

Emotionally
Have you ever stepped back and asked yourself how you treat other people and how that affects them emotionally? I have four children. I am acutely aware that they are being shaped emotionally by how I treat them and teach them how to deal with the world. I am especially aware of this from my own background. I can directly trace my emotional shortcomings to the emotional coolness I felt from my own family. Are you raising emotionally healthy kids who are both independent as well as interdependent? Are you helping your spouse to grow emotionally? Give this some serious thought.

Spiritually
In my mind, the "God" question is the most important. You know, I often hear people say that they are just going to let their kids "figure it out on their own." These same people will show them how to shoot a basketball, trade stocks, and build a tree house, all simply temporal issues, but then leave the answers to the most important question up in the air! Now I am not advocating cramming anything down their throats, just taking the time to help them find their way. Are you helping and encouraging those around you to find their spiritual life? Are you living an authentic spiritual life that will be your legacy? Give some serious thought to this.

Physically
Now I know what you are thinking: I can't change my genes. We got what we got and we have to live with it. To a certain extent this is true. I am 5 foot 11 inches tall for the rest of my life. I will never be 6 foot, and neither will my kids. What I am talking about though, is to be examples of taking our physical health seriously. The statistics prove that whatever bad habits you have, your kids are likely to do them as well. Why? Because you are their example. This is why I work to stay physically fit. I work out. I lift weights. I eat right (most of the time—I am a sucker for Breyer's Vanilla Bean Ice Cream). I don't smoke. I want to leave a legacy of good health for my kids. True, they can still go astray, but I will do my best to give them a good example to follow. Give this some serious thought.

Financially
There are two primary ways you can leave a financial legacy. First, teach your loved ones about how to handle money (some of you may first need to learn yourself). There are just so many good books on the subject that there is no reason for not knowing how to handle money. "Rich Dad, Poor Dad" is a good book to start with, or perhaps "The Millionaire Next Door." These will teach you the basics. Secondly, you can leave an inheritance. Now let me be clear on this. This does not have to be after you die. In fact, the more you have, the more I believe you ought to give away while you are alive. Let's face it, the older you get, the less need you have for money once the basics are taken care of. It always cracks me up that by the time you can afford a big house, your kids are gone and you don't need one! Turn the money over early so you can watch the joy of your loved ones spending, investing and giving it! This is of course predicated upon the assumption that you have first taught them how to handle it. If you have, then you should give it away while you're alive so you can enjoy seeing your legacy in action! Give your financial inheritance some serious thought.

Relationally
What kind of legacy will you leave in regard to how you interact relationally with people you know? When people look at how you interact with others, will they be better off if they develop the same relational habits? Will your legacy be one of love, patience, kindness, faithfulness, gentleness and forgiveness? Give the idea of influencing others relationally some serious thought.

Intellectually
I don't know about you, but I want to challenge people to deeper intellectual thought. In a day and age of "People Magazine" mentalities, we need people who will challenge us to think deeper. Are you doing anything that will challenge your sphere of influence to intellectual gains? Will those left after you are gone say that you made them think in ways they hadn't before? That you challenged them to be smarter? Give this issue some serious thought.

Functionally
Functionally? Yep. It's a catchall word. It is how you function. How will those you influence actually function? This is to a great degree how you function. Are you well-rounded? Are you balanced? Do you keep the main things the main things? Is your life functioning well? Make it your goal to live a balanced, functional life so you can leave a legacy of such. Give your life function some serious thought.

Follow up on the BMO as I missed two important factors!

2012-01-17T09:24:00.001-08:00

There's two other reasons that this mortgage at BMO may not be a part of your strategy.

One being, that you can not register their line of credit product in behind it. Making you search else where for it or making you take an unsecured line of credit at much higher rates.

The other is that the register their mortgages as collaterall mortgages. Read here and here on why these mortgages may not be for you.

Don't get me wrong. This product may be for some. You must allow us a chance to sit down and see if it is or not!

Another small story on the collaterall charge mortgages. I just recently finished one up with a client who needed a private mortgage to finish some renovations on his house. Since his big bank mortgage was registered as a collaterall charge with a very high global limit, we were unable to do anything until the client refinanced his existing mortgage going from a deep discount off of prime to just prime on the variable. He paid a full penalty too!

As a mortgage planner and educator, I have to make sure I know and understand every product out there. You have to trust that I am on your side and do what it takes to make sure you have the lowest cost of home ownership....not just the lowest rate.

Read the fine print - May not be as good as it looks!

2012-01-12T10:36:00.000-08:00

Today BMO came out with a five year fixed rate promotion of 2.99%. This may sound good, however, don't be too fooled as this comes with many restrictions.

-You can only discharge this mortgage with a bona fide sale of your home
-You can refinance into a new BMO product down the road, however, no guarantee you'll receive best rates at the time
-Maximum amortization is 25 years. Which is not bad, however, as a cash flow strategy having the higher amortization could be a better strategy
-Lower pre-payment priviledges
-No skip a payment option
-Only once per year can you make a lump sum payment. You should be able to as often as you want

In the end, you can not determine your mortgage simply based on pricing. If it's too good to be true, it usually is. With these limitations savings of interest can be hard.

Here's a post from an industry blog that sums it up:
"I don't see what's so insane about this offer...What concerns me are the myriad of restrictions that are attached to the offer. The homeowner is essentially shackled to BMO for 5 years. You can't even discharge this mortgage unless an arm's length sale of the property takes place or you refinance into another BMO product. Suppose you have to refinance two years down the road, would BMO put in writing that you'll receive their best rate at the time? With lenders like ING, MCAP, LBC I know I'm getting best rates. Can the same be said for BMO?

Not saying this offer doesn't have its merits because the pricing is quite attractive but when you look at all the strings that are attached, and considering that it is a time-limited offer, I think it's more about breaking the psychological 3% level (well, by .01%) rather than offering anything of significant value. Low rates are great but what people need are strategies. Unfortunately there's not much strategy that can be done with such a restrictive mortgage. It may indeed work for some but clearly not everyone..."

Maximizing good neighbour behaviour!

2011-12-12T11:09:00.000-08:00

Essentially, being a good neighbour means being considerate of how your behaviou affects your fellow residents. Here are some tips to keep in mind!

Keep up with garden chores

If you have a yard, keep your lawn mowed, your trees and bushes trimmed and your weeds under control. (I wish that some of my neighbours would read this!!) A well kept yard is welcoming to neighbours, and could encourage pride in their homes and neighbourhood!

Be conscientious about noise

Mowing your lawn in the early morning or during dinner can be intrusive, especillay in warmer weather when neighbours are enjoying dining outdoors. The same consideration should be taken with snow blowers and other loud equipment.
This rule applies to parties too. Give neighbours advance notice of the day you plan to have a party, the start time and when you expect it to end. Let them know that if the nouse gets too loud, they are welcome to call you.

Keep your dog under control

Always keep your dog on a leash during walks and never let it run free in the neighbourhood. Anyone with a fewar of dogs could be afraid to exit their own home. Keep barking to a minimum. For someone relaxing in their backyard, it can become an annoyance quickly. And, of course, always clean up after your dog.

Welcome new neighbours

A friendly welcome to new neighbours can immediately provide them with a sense of belonging. Let them know garbage and recycling days, where to find the local grocery store and post office, and offer to be their go-to person for questions about the community.

Consumer debt is the problem.

2011-12-08T14:31:00.000-08:00

I came across an article today that I've been try to stress for a couple of years now. (more so when the federal government starting changing mortgage rules)

The debt problem brewing in Canada is NOT due to mortgages. The problem is due to all the un-secured debt; line of credits, visas etc. which the banks almost force on people to take.

The article is here and I truly beleive that something has to be done.

The end all is that we must be responsible for our own actions and not take on the unecessary debt. However, if a family situation takes place, sometimes you need to fall back on the equity in your home. With all the rules that have pretty much killed the refinance business and with more and more banks registering mortgages as collateral mortgages not allowing you to take out a second, I guarantee you that we will start to see more foreclosures, consumer proposals and bankruptcy's.

Time will tell...

I can't beleive this can happen.

2011-12-02T11:14:00.000-08:00

Yesterday a fellow co-worker went through an exact situation that I've been through twice in the past and I feel very compelled to write about it today.

A client of hers needed to redeem his GIC from a major banking institution and went into the branch yesterday to do so. He needed these extra funds for his down payment and he knew that pulling the money out early meant he didn't receive any interest that he would have earned on this money.

However, when this fellow went into the branch to redeem his money the bank told him that there was no way he could UNLESS they did the mortgage. WHAT?????? This is complete black mail and is brutally unfair.

"Don't worry," they told him, "we'll give you free banking as well". What a joke as the rate he is getting was slightly higher than the one she was obtaining and they knew that. So the $5/m he saves in "free banking" will actually end up costing him more in the end as he's in with a slightly higher rate and doesn't have the expertise of an experienced mortgage broker monitoring his mortgage through it's life.

He felt very stuck and like he had no other option. Which I don't blame him for.

I'm not too sure if there's a moral to this story or not, however, it makes me very frustrated and upset that we continue to be taken by the big banks and others. This type of business is WRONG.

Why is Christmas soley about spending money?

2011-11-23T10:28:00.000-08:00

Why do so many people beleive that Christmas is solely about the money we spend?

I've been saying this for years as do many people in the comments of this article. http://bit.ly/sFVEIX

Why isn't it about being close to family and friends and enjoying each others company? It's virtually the only time of year that we really stop what we're doing and make this happen as we're always "too busy".

Don't get me wrong it's nice to open up a gift or two and more importantly watching the children's eyes light up when they open their gifts! However, I would really like to see it go back to even when I was a kid. I did look forward to the presents, more importantly I looked forward to the big party in the evenings where we all got together and played as kids!

I guess I can keep dreaming and do my best to make sure my two little girls understand the true meaning :)

On a side note:

I particularly enjoy reading when big banks talk about this sort of thing. And quite honestly, I feel bad for the not so smart people who beleive what the banks say and beleive they have more money and spend more...all on the banks credit etc. More interest money for them!

How much more can we take?

2011-10-07T13:21:00.000-07:00

Today I'm writing as I'm getting to that boiling point where many of you are as well.

There's one thing in life that I really can't stand and that's being taken advantage of. And especially being taken advantage of from our government and big corporations. Good on the people on Wall Street for taking a stand.

I wont get into the whole oil and gas spiel as I know I share the same views as almost everyone who depends on their car.

As well I wont get into the proposed 2c a litre gas tax being voted on today and the increase in property taxes to pay for a transit system that will NEVER work. Especially for us in the burbs.

My main focus is on banks and lending insitutions. In the last week we're seeing lenders dramatically reduce the discounts off of prime. They say due to liquidity issues. This is utterly wrong. In my opinion and I've been told by lenders themselve, the reason why the don't like variables is they don't make as much money off of them. So their reducing the discounts to bring them closer in line to the fixed rates so people lock in instead of float.

Oh and by the way, one lender just emailed me right now saying the discounts are pretty much gone as of Monday afternoon and will most likely be surpluses. Thanks for the heads up going into a long weekend!

Just today RBC announced rate cuts on their fixed rates. Conveniently only on the shorter 2 and 3 year terms. You may say this is good. No it's not! Why? Becuase anyone that bought into a fixed rate a few years ago are sitting in the high 4 to mid 5% range. If you wanted to take advantage of reducing your rate to lower your payments and pay less interest costs, you would have to pay an IRD (interest rate differential) on your current rate and the current 2 or 3 year fixed term. See where I'm going with this? I heard of one persons IRD go UP $4,000 in a matter of two days because of this. Absolutely NOT FAIR.

These big corporations are doing nothin more than taking advantage of us consumers by taking every last dime out of our pockets to put into theirs. Having a CEO making less than $10 million a year is just unheard of.

Anyways, theres my rant for the day and beleive me, I could go on for much longer!

Have a great long weekend.

Inflation Hedge Strategy

2011-09-22T09:44:00.000-07:00

Inflation Hedge Strategy at Work

2011-09-22T09:39:00.000-07:00

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

Influence and Association

2011-09-21T19:47:00.000-07:00

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.

Purchase plus improvements

2011-09-21T13:20:00.000-07:00

-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.

What style of variable should I take? Open, closed, or LOC

2011-09-14T15:41:00.000-07:00

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!!

More tightening of mortgage rules? Why?

2011-09-09T09:12:00.000-07:00

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.

BC Retains AAA Credit Rating

2011-08-29T13:19:00.000-07:00

British Columbia will retain its AAA rating despite the defeat of the harmonized sales tax, says credit rating agency Standard & Poor's.

An AAA rating reflects "extremely strong capacity to meet financial commitments," according to S&P's website.

Regarding its decision to continue the top-level rating for B.C., the agency said the province has the solid revenue and expenditure flexibility necessary to meet its deficit targets and a moderate tax-supported debt burden.

But it said B.C. faces new challenges - the loss in revenue; the initial administrative costs of transitioning back to a PST-plus-GST tax system; plus the likelihood of having to repay $1.6 billion in HST transitional funding from the federal government.

B.C. Finance Minister Kevin Falcon welcomed S&P's statement. "I believe this is a reflection of the fiscally conservative approach we have taken over the past decade," he said in a press release. "During this time of global economic uncertainty, our credit rating is more important than ever and we will continue to manage taxpayer dollars responsibly while we focus on strengthening our economy and creating jobs."

medha@vancouversun.com

The more you make the more you pay???

2011-08-19T11:04:00.000-07:00

I just read this and had to share it:

"In the Bank of Canada study I referenced earlier they cite: “The results indicate that high-income borrowers pay more for their mortgages, as do loyal consumers, consumers who search less, and those that value large branch networks”."

We have to be reminded that without mortgage brokers, and the competition we bring to the big banks, we all as mortgage consumers would be paying far higher interest rates.

The banks are in business to make money and that's the bottom line. In the end more times than not they will try to fill their pocket books with your money. Where as me, the Mortgage Broker, who works for you, will do the opposite and try to keep your pocket filled with your own money.

Day in and day out I hear stories from people who are at their branch and they feel the branch is not doing a good enough job, especially when it comes to rate. They talk to me, find out that I can usually do a better job not only on rate but on overall product, then they go back to the bank and the bank matches them and they call me back and say 'thanks for your help, the bank matched you and I'm staying with them.' WHAT ARE YOU THINKING!?!?

Why would you go back to them when they've clearly tried to charge you more and have clearly shown that you are just another potential sucker? And most importantly, what product did they suck you in to? Read my other posts on my blog about products and why the best rate is not always the cheapest for you.

Anyways, I could go on and on about this, however, I wont bore you!

"Beware of collateral-charge mortgages"

2011-07-14T12:13:00.000-07:00

I've talked about collateral mortgages a few times in the past.

Today I opened up the latest edition of the CMP (Canadian Mortgage Professional) Magazine and came across an article that I had to share.

"Beware of collateral-charge mortgages"
While private lenders are increasingly looking for 'opportunity financing' that expands their portfolio beyond refinancing and debt consolidation, that core business remains an industry pillar. The growing use of collateral-charge mortgages by the big banks, however, is threatening to erode that support, said David O'Gorman, broker/owner of MortgageLand Inc., an independent firm brokering private lending deals.

'We're saying 'no' more often now than we did in the past, and i can think of no less than six people since last year that we've simply had to turn away because there was nothing we could do for them,' he told CMP. 'It's because they've signed up for a collateral mortgage with the banks, and have pledged all their equity to that bank. It makes it all but impossible for a second lender to come behind and provide a second mortgage or refinancing or even for a homeowner to switch lenders at renewal.'

Last fall, O'Gorman and other brokers working with private lenders raised the specter of a loss of business stemming from collateral mortgages at the big banks. They are securing mortgages with a promissory notes backed by collateral charges. That translates into a first or second lien on the property for as much as 125% of its value. That doesn't, in fact, mean the borrower is guaranteed access to all those funds.

The private lenders that O'Gorman deals with - along with most banks and monolines - refuse to accept the transfer of collateral mortgages, forcing homeowners to pay additional fees to register a new mortgage in order to move the loan from the original lender for a much-needed second mortgage or refinance.

O'Gorman wrote to people, with 'different to the norm' conditions and increasing the borrower's exposure to significant loss, all the while flogging a cheap closing service, enticing the borrower to go without the opportunity of having an independent legal opinion of the documents they are signing, just plain stinks' he wrote in the two-page letter.

A policy adviser for Flaherty did contact O'Gorman for a brief discussion, although the broker doubts the matter will move beyond that.

Be leary of collateral mortgages. Ask a professional to explain them to you and why they may not be the best option for you.

Mortgage Apprenticeship

2011-07-06T10:41:00.000-07:00

The write up well below belongs to http://www.canadianmortgagetrends.com However I thought it so important I wanted to put my words into it and pass it along. For comments and other greatly written articles in our business, I encourage you to go to their website.

Here's my take:

I've been in the Mortgage business approaching 7 years. My first couple of years were very difficult. Fortunately I was able to be mentored by one of the best brokers I know today.

In my first year of the business I did place a few mortgages, with the help of my mentor. My MAIN focus though was learning products and learning them well. I used to go for coffee on a daily basis with lender reps so I can gain knowledge. I still do this. I thought that this was mandatory as, why would I want to put someone in such a big investment and not know what I was doing???

So often I see "Mortgage Professionals" come right out of school and try to jump in and sell mortgages to people without knowing if that's the best product for someone. All they worry about is having the best rate. As you've read in my previous posts, IT'S NOT ABOUT RATE. It's about knowing your products and finding the right match for that person(s) need, for the short term AND the long term.

As a true mortgage professional, I am still consistently going out with my lender reps to gain product knowledge and being an AMP, (Accredited Mortgage Professional) I am required to do a minimum 12 hours of education, which I consistently do more than every year. Not to be a bad mouth, however, bank reps do NOT have to go to school to get licensed. They also do not have to do training hours yet I do know some that do.

I truly believe to keep our industry as professional as possible, we must be adhered to proper training in the beginning 2 years and mandatory education for EVERYONE no matter if you have the AMP designation or not. We have to stay on top of our products and make sure we always do the right thing for the client.

Article from http://www.canadianmortgagetrends.com

Mortgage Apprenticeship

Plumbers can't get a license without an apprenticeship.

Makes sense. You wouldn’t want a botched pipe job putting your house under water and costing you thousands.

The advice of a mortgage banker or broker could cost you just as much—if it’s bad.

That might make you wonder: Why is there virtually no legislation to ensure that bank reps and brokers have the practical knowledge to advise you properly?

We as brokers do have to write a licensing exam (depending on province). That, however, doesn’t prepare us to skillfully counsel you about:

term selection and suitability
mortgage restrictions
refinance analysis
mortgage portability rules
prequalifying with atypical income or credit
credit rebuilding
financing condition removal
porting default insurance
…and dozens of other mortgage topics where advice could cost (or save) you thousands.

Few things would boost our industry’s creditability more than practical training requirements. A 12- to 24-month apprenticeship under an experienced sponsoring broker would ensure new brokers have a minimum degree of competence when advising consumers.

At the moment, our industry relies on a system whereby someone who passes a background check, completes a licensing course, and joins a brokerage firm, can counsel you on a transaction worth hundreds of thousands of dollars. Poor guidance generally goes unnoticed because, most of the time, customers don’t even know they’ve received bad advice.

Fortunately, the majority of practicing mortgage professionals are experienced and highly capable. But it takes time and a lot of mistakes (often at customers’ expense) before most new brokers have the skillset needed to be proficient.

Having a senior broker review and sign off on a new recruit’s applications for 12-24 months would be one way to help clients avoid paying for inexperience.

Rule of Thumb: Never be afraid to ask your bank rep or broker:

How long he/she has been a full-time mortgage professional
How much volume he/she has closed in the last 12 months.

If the individual has been full-time less than a year or has closed less than $5 million of mortgages in the last 12 months, take extra care when evaluating their expertise.

CMHC info breakfast notes

2011-06-23T10:39:00.001-07:00

This morning I spent some time not only having a good breakfast, learning a few interesting points from CMHC and their research. More geared towards the Fraser Valley.

Here's some interesting points that I was able to quickly write down. They are in point form and some may just seem random. I tried to write down what I beleived were the most important!

-Fraser Valley market is in a balanced market, while Chilliwack is in a buyers market

-Vancouver average house price is $1.182m while the Fraser Valley is at $623k.

-With the twinning of the Port Mann more people are to settle in the Fraser Valley. Easier access to Vancouver and surrounding areas which will keep the Fraser Valley, more so Surrey and Langley as a hot spot

-House prices are predicted to go up 5% in 2011 and 3% in 2012 in the Fraser Valley

-Rates are to remain favourable

-CMHC predicts the variable to have a very modest increase of maybe up to .50% in 2011 and 2012

-$123B in housing starts are registered

-Inter provincial population growth is expected to be about 8-9000 people. Which international is expected to be around 50-55,000 for 2011-2012. In the Fraser Valley approximately 11,000 of those will come while the others spread around the GVRD. Surrey is still expecting about 1,000 people a month, as it is right now, to come.

-Business bankruptcies do not have huge numbers like they did in the 90's which is a great sign

-The population age between 65-74 years old is growing fast and more demand for smaller homes will be needed

-Full time employment is down. Abbotsford's unemployment was one of the highest recently at just over 10%, while in the last month it has come down

And here's something that I really didn't know about in regards to your CMHC insured mortgage if you are making lump sum payments. You can actually ask for that money back from the lender in one lump sum or over a period of time. The returned amount has to be the lesser of the original amount or 90% of the homes value.

Why the banks are ran solely as a business

2011-06-07T12:38:00.000-07:00

People say to me a lot 'oh I'm ok, I don't need your services, I've been dealing with my bank for 30+ years. They'll do what I need'

I hear this often and I have one good story that hits a little too close to me and some past clients.

I know of an older dear couple that the wife had just passed away and the husband needed to get out a $30k unsecured line of credit. Not that he needed the money. It was that all his investments were tied into GIC's (which is not good)

His bank, with which he's had a relationship for 30+ years, turned to him and said "sorry the max we can do without securing against your home is $20k" This wasn't enough for him. A funeral now a days is pretty darn expensive.

So he complained a little, told them he had more than enough in his GIC's to cover it etc.

They let him leave saying we'll look into doing something and will call you back in a couple days.

Finally they did and this is what they did for him. 2 line of credits of $15k each. One at Prime +.50% and one at Prime +3.5%. Secured against his GIC's.

They would NOT give him a full $30k, with a good rate, unsecured. I think this is wrong as he's been such a huge supporter of this bank for so many years.

The moral of this story is, no matter how long you've been with your financial institution, it does not necessarily matter. Not to say this is the case all the time, I just hear about it a lot. Using an independent whomever mortgage, insurance, investment, adviser is always the way to go as we are unbiased and do not use just one lenders products.

Remember the banks are in it to make a profit. This is their sole drive.

Great quote - Follow up to, 'not about lowest rate'

2011-06-01T13:59:00.000-07:00

I was sent this quote today and it ties in so perfectly to previous posts about how it's not about the lowest rate out there, it's about the best product that suites your needs and not the lenders needs.

Here's the most recent post http://gitersos.blogspot.com/2011/05/its-not-always-about-lowest-rate-follow.html

"It is unwise to pay too much, but it is worse to pay too little.
When you pay too much, you lose a little money...that is all.
When you pay too little you sometimes lose everything, because the thing you bought was incapable of doing the things it was bought to do.

The common law of business balance prohibits paying a little and getting a lot...it cannot be done.
If you deal with the lowest bidder it is well to add something for the risk you run.

And if you do that, you will have enough to pay for something better.

There is hardly anything in the world that some man cannot make a little worse and sell for a little cheaper, and the people who consider price only, are this man's lawful prey"
JOHN RUSKIN (1819-1900)

Variable rate discounts may not be decreasing

2011-05-25T15:23:00.000-07:00

About a week ago I had talked about lenders trying to decrease the discount off of prime.

One major lender, one of the largest mortgage lenders in Canada, had tried hoping that others would follow suite.

Well it didn't happen, or hasn't happened as of yet. Some of the lenders that moved slightly are back to where they were just prior.

I believe it was this one lenders kick at the can to try and slow down the variable business as for the lenders they're not huge money makers as a fixed rate is. Currently they are way offside with their variable discount and I can only imagine that they will soon be back to normal.

Deposits on a home purchase

2011-05-17T10:46:00.001-07:00

When you purchase a property you will need to have a certain amount set aside for subject removal that will go towards your down payment on completion.

This money, whether it be $10k or up to $100k+, depending on the value of the home being purchased, has to be provided at the time of subject removal. This can be within a week or two of writing an offer and the offer being accepted.

What you need to know is that you have to come up with this money. Lenders do not generally lend you this money.

You should have the discussion about the deposit with your Realtor as early as writing the offer so you can determine what an amount is appropriate and attainable.

CAAMP Spring Survey - Interesting Facts

2011-05-11T10:44:00.000-07:00

This is the fact sheet for the CAAMP Spring survey that was just released. There's some good information.

There is currently $855 billion in mortgages on principal residences and $215 billion in Home Equity Lines of Credit (HELOC)

• Individuals with HELOCs only have an average 65 per cent equity in their homes

• HELOC prevalence is highest among middle age homeowners

• Equity takeouts amount to $26 billion annually, with most funds used for renovations ($9.4 billion), followed by investments ($5.0 billion)

• The average down payment for a home purchased in the last 12 months was 30%, up from 26% for homes purchased two years ago

• Among all borrowers, 63 per cent have fixed rate mortgages, 30 per cent have variable rate mortgages and 6 per cent have a combination of both

• Less than a quarter (22 per cent) of all borrowers have amortization periods longer than 25 years

• 34 per cent of those who most recently renewed or renegotiated their mortgages did so before their term expired. The average time to pay off a mortgage is 7.4 years less than the original amortization

• 200,000 homeowners paid off their mortgages in the last 12 months

• The average mortgage interest rate discount is 1.44 per cent for those who chose a five year fixed rate mortgage in the last twelve months with the average mortgage rate being 4.04%

• Of those who renewed their mortgages in the last twelve months, 65 per cent are paying lower rates than previously

• 66 per cent of all mortgage borrowers can tolerate a monthly mortgage increase of $300 or more

• Among borrowers who took out a new mortgage in the last 12 months, 27% obtained it from a mortgage broker. Overall mortgage broker share stands at 23%

• Canadian appetite for home buying has returned to pre-recession levels, following a slide over the past three surveys. Almost 60 per cent respondents thought that now was a good time to buy

• Optimism is returning to the market with almost half (46 per cent) of those questioned saying that they expect prices to rise

Here's the final report

It's NOT always about the lowest rate - Follow up

2011-05-04T11:18:00.000-07:00

To start off. I am in no way putting down any one lender or financial institution. All I'm doing is simply giving you the facts so you, the public, are more cognisant of what truly lies behind a mortgage.

This is some of the not so good that lie behind one lending institutes great low rate mortgage. That is, if you can even obtain that great low rate.

• Interest rate premiums will apply when certain debt servicing requirements are not met and if your credit score isn't as high as they want. (with other institutes I have access to, the rate you see is the rate you get)

• No transfers of your mortgage to a new home without a penalty. The lender will only do a refinance meaning the client must pay their own legal fees. (this is not good. You should be able to take your mortgage with you and do a blend of rates with no penalty. They show you a great rate, however, you may end up paying much more in the end. If you took the rate slightly higher with this option then you would end up way ahead)

• Registers all mortgages as Collateral Mortgages. (See here why these are not good http://gitersos.blogspot.com/2011/04/collateral-mortgages.html)

• Lender does not collect property taxes on the client’s behalf.(Not necessarily a bad thing, however, I would highly recommend this option as making small payments to build up a property tax payment is much easier than waiting until the end of the year to pay one large lump sum)

• Pre-payment privileges are 20% on the anniversary date ONLY. (Most other lenders allow you to prepay up to 15-25% with as many payments a year as needed with a minimum payment of $100 a time. This option is much better as you are continuously paying your mortgage down which means that you are pay less interest overall)

• If the mortgage amount is less than 65% of the homes value then they may be able to waive an appraisal. An appraisal comes with a cost of $250(most lenders I deal with will not need an appraisal. The only time an appraisal is a must is when you put 20% or more down, and it's a rental property or your going under a self employed, stated income program.

• Pre approvals/rate holds are only 90 days not the typical 120

• The branch will do a call and try and sell extra products i.e. life insurance prior to funding

• Clients have to go to the branch and set up an account prior to closing adding extra steps to the process and taking up your time

• The lender may request you to pay out and close revolving credit product(s) i.e credit cards. I've seen an instance where a young client had to CLOSE her only two revolving credit cards with a mere $2,500 limit/balance on each. The credit bureau will be impacted negatively when you close accounts. And then she'll need to re-apply for a new credit card to keep her credit in check, which will then take more points off her score and take up time to do so.

I've also had another client with a line of credit and NO balance and the lender wanted it closed.

Variable rate discounts decreasing?

2011-04-27T09:12:00.000-07:00

Yesterday we had a major lender reduce the discount off of prime by .25%. We also had one other major lender say something similar is coming down the pipe and to be prepared.

In my career, which is 7 years, this is only the second time I've seen this. I'm curious to see if other lender will follow or if it's a blip with this particular lender.

There's too much competition out there that now they've put themselves out of the market.

The bank is claiming there profit margins are diminishing.

Lenders have always disliked variable mortgages for this very reason.

I'll keep you posted!

It's NOT always about the lowest rate.

2011-04-17T21:47:00.000-07:00

First off this blog is in no way being written to bash any lender or bank out there. Every lender serves their purpose and are the right fit for someone. This blog is to make you, the consumer, aware that it's not always about the rate you see on paper. It's about the flexibility and options that you need in a mortgage. I like to say to people, "do you want the best rate or the best product". With the options of a mortgage broker you can get that best product!

Here's just a couple of many examples:

Yesterday I opened up my local paper and saw Prospera's "myStyle' low rate fixed mortgage product that offers free legals, appraisal and inspection or $1,500 cash back. Sounds great right? In theory it is great, however, the small print that comes along with this mortgage is a bit alarming. The biggest thing that stands out to me is the 12 month interest penalty...yes 12 months. That's 9 months more than standard. There is only a 10% increase in payments per year and no lump sums as well. http://bit.ly/e5ywbA All this to get their 'best rate'. That $1,500 doesn't sound very good anymore.

On the variable product they do something as well that some lenders do that is NOT GOOD. They don't allow your payment to increase when prime goes up. What essentially happens, especially now that we're in an increasing rate market, is that more of your payment goes to interest and the principal portion diminishes. This leads to negative amortization. I've seen a 25 year amortization jump to almost 40 years before. The person was quite upset when I explained to them what the bank was doing.

There's also the Vancity product that is quite low on the fixed rate. This isn't offered unless you take 2 other products with them i.e., RSP's, insurance etc. If you're not a member, prepare to pretty much move everything to them to get this rate.

As mortgage brokers we know the lenders that not only have pretty darn good rates, but they also have all the features that you have come to expect. You can't always find this with one particular bank or lenders' products. Remember it's not always about rate. Planning and working a mortgage around your needs is what's important.

Make sure that you at least give a mortgage broker a shot to see if they can help you make the right decision. You owe it in yourself to do so. We don't charge for a consultation and unless you're obtaining private money (seconds etc) we do NOT charge a fee to help out. The lender/bank compensates us.

Again, know that I'm in no mean going after any one lender or banks products. This blog is solely to make you aware to read the fine print, it could mean a lot.

Collateral mortgages

2011-04-13T20:38:00.000-07:00

I really feel strong about the consumer, you, knowing about these collateral charges.

I sat with a realtor today and explained the difference of a good rate and a low rate and one is this collateral charge. She was blown away wi the differences. Always talk to a mortgage professional. One who has options and is not tied to one lender.

This video blog may not make perfect sense to you and if it doesn't, please ask me for more clarification. I just couldn't say what I wanted in a short video blog!

Here's the other two blogs:
'follow-up-on-collateral-mortgages'
'collateral-mortgages-yes-or-no'

Where did all my friends on FB go?

2011-04-12T21:01:00.000-07:00

Ever wondered why you don't see all your friends on your personal or fan pages anymore? I did and found out why. My conclusion is that FB makes way TOO many changes TOO frequently and doesn't tell anyone. It's kind of annoying.

Anyways, I had to create an event with this...

PLEASE READ:
THIS IS VERY IMPORTANT TO EVERYONE WHO USES FACEBOOK FOR BUSINESS OR PERSONAL REASONS AND WISHES TO STAY IN TOUCH WITH THEIR CONTACTS!!

Have you noticed that you are only seeing updates in your newsfeed from the same people lately? Have you also noticed that when you post things like status messages, photos and links, the same circle of people are commenting and you are not hearing from anyone else?

...The problem is that a large chunk of your contact list can't see anything you post and here's why:

The "New Facebook" has a newsfeed setting that by default is automatically set to show ONLY posts from people you've recently interacted with or have interacted the most with (which would be limited to the couple of weeks just before people started switching to the "new profile"). So, in other words, for both business and personal pages, unless you or your friends/fans commented on one anothers posts within those couple of weeks - you are now invisible to them and they are invisible to you!!

HERE'S THE FIX:
On your homepage click the "Most Recent" title on the right of the Newsfeed, then click on the drop down arrow beside it and select "Edit Options". Click on "Show Posts From" and change the setting to "All Of Your Friends and Pages" (you can also access the "Edit Options" link at the very bottom of the Facebook homepage on the right)

Note: Business pages do not have a newsfeed. Owners of business pages should adjust the settings on their personal accounts.

The good news is:
You can now view all of your friends and fans again.

The bad news is:
YOU ARE STILL INVISIBLE to a large portion of your list. If you want to re-establish contact, you will need to get the word out to ALL of your contacts by inviting them to this "event" or creating one of your own so they can read the post and adjust their settings.

To invite your friends:
Click on "Attending" at the top and then you will see an option to invite your friends under the smiley face. It’s public so everyone who logs onto Facebook can view it and even the friends who can’t see your posts WILL see the event invitation. You can also tweet about it, create a blog post or send out an email to your subscribers in hopes of reaching them all.

Purchase plus improvements

2011-04-05T08:53:00.000-07:00

Purchase plus improvements transactions allow the purchasers to finance the costs of immediate renovations or improvements through the mortgage loan by using the “Estimated Market Value”; value after these renovations or improvements have been done.

Here's how the program works at one lender which is pretty much standard across the board.

Conventional Loans – In addition to the standard purchase requirements, the
following criteria apply:

• Appraisal will be required. The appraisal report should indicate both values e.g. “Current Market Value” and “Estimated Market Value”.
• Lending value must be calculated using the lesser of the “Estimated Market Value” or the “Total Cost to Improve Value”.
• A quote outlining the work to be done, the cost of improvements and expected completion date must be obtained and reviewed prior to completion.
• Work must normally be completed within 90 days after completion
• An amount equivalent to the cost of improvements must be held back. The hold back should be released once the work has been completed, inspection report provided and any lien period has passed.
• No maximum threshold for the cost to complete renovations / improvements.
• Progress draws are allowed when renovations / improvements are major and progress draws requirements apply.

CMHC Insured Loans – CMHC will insure mortgages for purchases plus improvements.

• The loan to value is the lesser of the “purchase price plus direct costs associated with the improvements” or the “Estimated Market Value”.
• A quote outlining the work to be done, the cost of improvements and expected completion date must be obtained and reviewed.
• Appraisal is not required. Originator and underwriter are expected to ensure reasonableness of the “Estimated Market Value”.
• Purchase advance based on the property’s “Current Market Value” and additional advances to cover improvements based on the “Estimated Market Value”.
• Work must normally be completed within 90 days
• If the increase does not require Progress Advances, the hold back may be released upon confirmation that the work has been completed. The following documentation should be obtained prior to releasing the funds:
• letter from the applicant confirming renovations / improvements have been completed
• receipts showing invoices have been paid.
An inspection report confirming the renovations / improvements have been done may also be acceptable

-----

Even though the program is out there it is not widely used. Most people don't like the short time lines used and most people are capable or know someone very capable of doing the work themselves.

Follow up on collateral mortgages

2011-03-28T15:05:00.000-07:00

Just doing a little follow from a previous blog ( http://gitersos.blogspot.com/2010_10_01_archive.html ) in regards to how collateral mortgages are not the best as another scenario came up again today.

Clients bought a town home for $320k last year. I did not do this mortgage. They went to their Credit Union. I received their Land Title Form B today and saw that this CU registered a value of $700,000. That's right 2.5 times more than what they bought the place for.

Now the CU or bank will tell you it's a good thing as you can pull money out later on without having to go through a lawyer. Well the blog post from previous is one example of why it's not a good thing. I know you may think this will never happen to you, however, you NEVER know. It's best to avoid the situation up front.

The other reason why I don't like them is that the only way out of a collateral mortgage is buy doing a full reregistration of your title, meaning lawyer costs of up to $750-800. If your mortgage is up for renewal your ‘free agency’ is no longer, as you can not do a straight transfer to a new lender without paying new legals. (straight transfer on renewals the new lender will pick up the small cost) Meaning your current lender may not be inclined to give you the best deal as they know you’re stuck and would not want to pay the new lawyers. Their hands are deeper in your pocket!

--------------

Support brokers. We're needed in this industry to let the consumers know what's out there and how the banks are trying to find ways to get more out of you. With out us and broker only lenders we would ALL still be paying posted rates. We're competition to the big banks.

Credit scores

2011-03-15T17:47:00.000-07:00

Here's a break down of how credit is calcculated

35% is based on your payment history -
Do you have a record of late credit card payments, delinquencies or bankruptcies? The more late payments on record and the more recent they have been, the more negatively they will affect your score.

30% is based on the amounts you owe -
This not only includes how much you owe but how much of your available credit you have used. If you consistently use 75-80% or more of your available credit (for example, keep your credit cards at or near the maximum), your score will be lower than if you are using a small percentage of the credit available to you.

15% is based on the length of your credit history -
How long you have had accounts and credit, factor into your credit score. Credit cards that you have held for a long time give you a higher score than new credit cards.

10% is based on how much new credit you have requested -
If you have requested a lot of new credit in a relatively short period of time, you are considered to be a higher risk than someone who has applied for less credit.

10% is based on the types of credit you use -
This includes mortgages, loans, and credit cards. If more of your debt is high interest credit cards, you may be considered a higher risk than someone whose biggest debt is their mortgage.

I'm getting tired..

2011-03-04T08:49:00.000-08:00

I'm getting tired of all these articles in the news lately saying we need to change the mortgage rules and make it harder to qualify etc.

This is absolute nonsense. Why does the government not want people to have an appreciating asset, yet they don't seem to come down on credit card companies, or banks that are giving out lines of credits.

Just the other day I was sitting at home and a guy from my local CIBC called. 'Hi Christos this is so and so from the Langley CIBC, I'm calling today to let you know that you're approved for a LOC and an increase in your credit card'

I started to laugh a little and said 'with consumers across Canada being upwards to 150% in debt to their household income, you're calling people trying to get more money out to them. Thanks but no thanks I don't need anything.' He in turn laughed back and said 'are you sure you don't want it, maybe for a rainy day or something.'

What I'm trying to say is that we do NOT need more stringent mortgage rules. They're tough as it is already. The market has been strong here in CDN and with the insurance, CMHC Genworth and Canada Guaranty, lenders are protected on higher risk files. (CMHC being the most commonly used and it's a crown corp. go figure! This is for a whole other discussion!)

CDN needs to come down harder on the unsecured debt and the credit card companies. These are where the issues lie. I've had, in the last year, a few people come to me saying I need a refinance, I've racked up credit card debt and they don't seem to stop giving me more. How much debt was there? Over $100k!

Here's a quote I found and it's completely true: "Regulators need to wake up & see that unsecured debt is the issue. I have clients that barely qualified for their mortgage, but the bank had no problem whatsoever in giving them an unsecured line of credit for $50,000 after their purchase closed."

I've had my rant for today!!

On title and not on the mortgage?

2011-03-01T16:07:00.000-08:00

As this came up again today and is putting an extra damper on all parties involved, I thought I'd write a little blog about it.

When you're purchasing a home and you're married, have a common law, or a partner that you'd like to put on title remember one thing. They can not just go on title at the time of completion.

You can not be on the asset (the home) and not be on the liability (the mortgage). The opposite is allowed. This would be called a guarantor or co-signor.

You also want to make sure that you're mortgage approval and purchase contract is written up with the other persons name on it. This can cause big problems when you're about to complete as I'm experiencing today. All the documents need to be rewritten and there needs to be an addendum drawn up for the sellers to sign. They may not always be willing, which I've experienced.

Moral of the story, be up front right from the start and be certain of whom will go on title so no major hiccups happen later on.

Benchmark rate at 5.44%

2011-02-15T11:00:00.000-08:00

If you want a 1 to 4 year fixed term or a variable you're qualifying at 5.44% as of yesterday morning.

This is a high rate and does put a variable, my favourite product, out of touch for some people.

If you want a 5 year fixed or higher i.e 7 or 10 year, then you qualify on the contract rate. Which today is in around the high 3's to low 4's. Big difference from the 5.44%

If you are going conventional, putting 20% or more as a down payment, the non bank lenders will allow you to still qualify for the 1-4 and variable at their discounted 3 year rate. Which is mid to low 3's today.

This with the new changes to 30 year amortization, could definitely put some people out of the market.

I'm only sure better times are ahead. Once confidence is back, a little more lax on lending policies will follow.

A rate hike seems imminent

2011-02-04T13:28:00.000-08:00

Looks like the days of under 4% five years are going away soon. The bond yields keep creeping up which means the banks need to keep their margins in tact to keep profits up.

This can be a good thing for some and a not so good thing for others.

The reason it can be a good thing for some with a fixed rate is, if you're looking to make a change in respect to your mortgage, i.e refinance or move, then you can look at getting yourself booked with a rate right now for 120 days, wait for rates to go up, and then order a discharge statement at the lawyers and there you go, you've just decreased your penalty and received the lower pre rate increase interest rate!

The bad news is, if you're wanting to get in the market in the Spring, you'll have a possible harder time obtaining the home you want. Due to higher rates and the cut from a 35 year amortization to a 30 year amortization.

Best thing is to get a rate hold now for 120 days. Even if you're not 100% certain you'll be ready in that time frame.

Call me today!

Pension Incomes

2011-02-04T10:51:00.001-08:00

Just some interesting info. on the amounts paid out for pensions.

Maximum Income Security Benefits Effective January 1, 2011

CANADA PENSION PLAN (JANUARY - DECEMBER 2011)
Retirement Pension (at age 65) $960.00
Disability Pension $1,153.37
Death Benefit (maximum lump sum) $2,500.00
Survivor's Pension (under age 65) $529.09
Survivor's Pension (age 65 and over) $576.00
Children of Deceased or Disabled Contributor $218.50
Combined Pensions
Survivor\Retirement (retired at age 65) $960.00
Survivor\Disability $1,153.37
Yearly Maximum Pensionable Earnings (YMPE) for year 2011 $48,300.00

OLD AGE SECURITY PROGRAM (JANUARY – MARCH 2011)
Basic Old Age Security pension $524.23
Guaranteed Income Supplement (GIS)
Single $661.69
Spouse of non-pensioner (does not receive OAS) $661.69
Spouse of pensioner (receives an OAS pension) $436.95
Spouse of Allowance recipient $436.95
Spouse's Allowance (SPA)
Regular $961.18
Widowed $1,065.45

OAS 15% clawback commences with an income above $67,688. The full OAS pension is eliminated when a pensioner's net income is $109,607 or above.
The Spouse's Allowance stops being paid at $29,376, while the GIS stops being paid at $38,112.

Further information can be found on the Service Canada website at the attached link:
http://www.servicecanada.gc.ca/eng/isp/statistics/rates/pdf/janmar11.pdf

Changes effective March 18, 2011

2011-01-26T11:13:00.000-08:00

CMHC was just in my office updating me on the new rule changes brought down by the Ministry of Finance for March 18, 2011.

The main thing to know is that if you have written a purchase contract prior to this date, you are still eligible for the 35 year amortization.

On a refinance, if you have a committed application with the lender, and is set to close past the March 18th date, then you're ok. So you're still allowed to refinance to 90% if needed.

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To clarify the new most important changes.

The maximum amortization for high ratio, and most like conventional (still hasn't been confirmed however, the head at CIBC told me the other day it's most likely for both) will go from 35 years to 30 years.

The maximum equity you can take out on your property for a refinance is a mere 85%. If your home is worth $400k. The most you can take is $340k

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Why I don't like these changes.

90% of my clients that have been put into a 35 year amortization do NOT need it. We use it as a strategy. Do one of two things: Keep the payments higher to whatever AM you'd like and in case something was to ever happen, you can always reduce your payments to increase your monthly cash flow.

Or you can take the extra, whatever amount, and start building your investment portfolio. At the end of the year, you should reduce your tax amount and/or receive a tax credit back which you can either reinvest or put on your mortgage as a lump sum to reduce your over amortization.

For the refinance- I don't like it as, a lot of clients that I have refinanced to 90% or 95% now or in the past, do not do it for debt reduction, they do it as they can take advantage of a lower rate and ONLY roll in their penalty to their existing balance. This doesn't allow those people to do this now which in turn is telling the client they have to pay higher and more interest. Doesn't seem fair to me.

Variable rates to stay low through 2011

2011-01-11T10:10:00.000-08:00

Variable mortgage rates:

The Bank of Canada will hold off on increasing interest rates during the first half of 2011. This means variable mortgage rates will also remain at low levels during this time and then gradually increase from there. As the Canadian economy continues to recover, the sluggish progress in the US and the frailty of the EU, tasks the Central Bank with maintaining a tricky balancing act.

"Governor Carney and his people will be trying to thread the needle on interest rates trying to balance the rising loonie against low interest rates that encourage further consumer indebtedness", says Dr Ian Lee, Director of MBA Program, Sprott School of Business, Carleton University.

Fixed mortgage rates:

The decreased demand for mortgages and relatively stable bond yields, leads us to believe that fixed mortgage rates will remain unchanged for the month of January. However, this outlook is susceptible to change with additional defaults in Europe or poor results on upcoming US economic indicators.

Also, ultra low interest rates for the past few years have fueled a borrowing frenzy creating concern about mounting debt levels for Canadian consumers. It wouldn't be a surprise if the government made a policy change to address the debt problem by adjusting the mortgage rules, likely spurring a change in fixed rates as well.

No change to prime

2010-12-07T09:40:00.000-08:00

As we thought the Bank of Canada did not do anything to the overnight lending rate.

Here's the full article from CTV.ca

Bank of Canada Governor Mark Carney kept the central bank's trendsetting interest rate unchanged in an announcement Tuesday morning.

The rate remains steady at 1 per cent and will stay there until next year at the earliest.

Carney raised the benchmark rate three times over the summer, but since then the economy has slowed and he has put the increases on hold.

The bank said Canada's economic outlook is not as bright as it was when it issued its last forecast in October. As a result, any interest rate increases would be carefully considered.

In one piece of positive news, the bank said household spending has been stronger than anticipated. But overall, there is room for improvement.

"Governor Mark Carney said there remains significant slack in the Canadian economy -- things are not banging on all cylinders as it were," said BNN's Michael Kane.

"The takeaway from all of this is the recovery is underway, the recovery is taking place, but at a moderate pace."

According to the most recent economic data, Canada's economic growth skidded to 1 per cent in the third quarter of this year. In the second quarter economic growth was double that rate.

On the employment front, November saw a slight rise in part-time work, but a drop in good full-time jobs.

Those numbers came as fewer Canadians were looking for work, meaning the actual numbers might be even higher than the 7.6 per cent on the books.

Manufacturing is also struggling due to the high Canadian loonie, which makes exports less affordable for foreign markets -- one of the factors the central bank said is slowing the economy.

Ahead of the announcement most analysts warned Carney would risk doing major damage if he were to raise the interest rate and it was more likely he would lower expectations for future growth instead.

Homeowners unfazed by long amortizations

2010-11-10T09:09:00.001-08:00

Here's an article I read this morning http://bit.ly/9XevR0 that I can agree with as well as disagree.

The level of people taking amortizations longer than 25 years is a growing trend, however, a lot of my clients that I coach into the right mortgage will take a 35 year amortization.

They don't take it to make sure they have the lowest payment and buy more home (well some do). They take it as a strategy for any future possibility of needing any extra cash flow per month. Maybe a loss of a job, death in the family, whatever.

What I say is take the 35 year AM, however, keep your payments at the higher level which is based on a 25 year or less. If an unfortunate event happened and you need that extra few hundred dollars cash flow per month, simply call and have your payments brought down to that lowest level. (most clients are able to do this online)

It's a simple solution to needing cash flow at some point down the road that doesn't have you panicking as much. If you register your mortgage in a 25 year originally, then the only way to go out to 35 is to re-register which you may not qualify for as maybe you lost your job.

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On another note, if your mortgage is insured with CMHC, Genworth or CG, there is also the home owner assistance programs that may help. This is for those that need help in dire times. The insurer and lender would rather see you work out a deal to keep your home than see you go into foreclosure. Another reason why our foreclosure rates are so low. We care!

Collateral mortgages. Yes or No

2010-10-22T13:00:00.000-07:00

In the news recently there's been a lot of talk of how TD is now registering ALL their mortgages as collateral mortgages. Some say this is a good thing, I truly believe it's not.

This isn't to say TD is the only one that does this. Most credit unions do and any time you bundle your mortgage with line of credits, visa's etc the same registration takes place.

This can be at 100% of the homes value a little less or in TD's case 125% of the homes value. However, in order to access the funds you have to re qualify. Dumb.

Here's just one example of why in my opinion this is a bad thing. Besides the obvious fact that the banks are giving people access to too much debt.

I have a great couple that just celebrated two daughters weddings. They used their credit cards and line of credit to pay for this. They unfortunately missed a couple payments and now their credit bureau doesn't look so good. So of course to go back to their credit union to advance some of those funds they have available they'll need to requalify. Well they can't.

The proposed solution is to do a one year second mortgage to clear things up and in a year redo their mortgage and roll everything into one.

Makes sense right?

Well in two words, they can't.

Now they're stuck with too much debt and will struggle and struggle to keep their payments up. Of course they should have consulted us first, however, when you're in the moment and you have two girls on you for wedding money, your mind isn't always there!

I just hope they can sustain the debt for another year or two so we can look at a solution at this time.

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Please MAKE SURE that you're mortgage is not registered as a collateral mortgage. The banks wont tell you they're doing it as it ties you into them and their one or two products. The only way out is to do a refinance.

Know the penalties:

2010-10-05T10:26:00.000-07:00

Knowing the rules of any game, usually gives
you advantage. The same goes for the mortgage
game. No one knows the rules better
than a full time mortgage professional that
deals in the “mortgage game” every day.

With record low rates a lot of borrowers are
choosing to refinance their mortgage to take
advantage of the savings. It’s important to do
the research up front to determine a number of
things:

• What exactly are the savings? Both monthly
and over the balance of my term.
• How much will my penalty be?
• How long will it take to recoup my penalty?
• Is there a way to lower my penalty?

While all points are important, the last one is
key. A true mortgage professional will easily
work through the first 3 points and do a full cost
benefit analysis to refinancing, and determine
your actual penalty and savings down to the
penny. The penalty does play a major role in
this scenario, and here’s where the twist comes
in.

With interest rates being so low right now, most
borrowers in fixed term mortgages will have to
pay an Interest Rate Differential penalty to get
out of their mortgage. These can be significant
as the amount of your penalty is determined by
the “spread” or “difference” between your old
interest rate and what rates are today for similar
terms (i.e. the amount of time you have left
on your mortgage.)

Armed with that knowledge,
there is an opportunity to hedge
yourself and lower your penalty.

If you’re not in a hurry to refinance,
and you believe interest rates have bottomed
out and will increase in the short term,
you can do the following:

• Book today’s rate for 120 days.
• Hope interest rates increase.
• Pay your mortgage off and refinance after
rates have increased.

Your mortgage professional will have to stay on
top of things to make sure your lawyer or notary
orders the discharge/payout statement from
your lender just before funding at the highest
possible interest rate day. That way your penalty
is minimized.

What this scenario accomplishes is the following:
You get your new mortgage at the bottom
of the barrel lowest rate, but your penalty is
determined on a smaller spread. You’ve got the
best of both worlds, lowest rate, and smallest
possibly penalty within the 120 day period.

I’ve performed this strategy many times in increasing
rate environments and the savings can
be substantial. The last client we did this for
saved $4,800 on their penalty by waiting 3
months to fund their refinance. Of course they
paid the higher rate on their old mortgage during
the 3 months, but the penalty savings were
worth more than the interest difference during
that period.

Mortgage Tightening In Works:

2010-10-04T13:02:00.000-07:00

Looks like the Federal Government may be tightening the rules on buying a new home.

This comes as our debt in Canada is now averaging 146% of personal disposable income.

In the US, when we hit the big crisis, roughly the same percentage was registered, which is very high. The Fed's want to look at making sure that this doesn't happen here in Canada.

We don't think that this would happen right away, however, may happen sooner than later. This isn't a good thing as we're already in a very slow market.

The article I read is here http://bit.ly/9HyqB2

Know the fine print of your mortgage

2010-09-30T11:21:00.000-07:00

The fine print in your mortgage may have costly or irritating restrictions that you won’t know about unless you read or ask a mortgage professional.

Some examples:

* Restrictions on breaking your mortgage before the term is up
* Restrictions on breaking your mortgage for the first 3 years
* A penalty surcharge of 1% for mortgages broken within the first 12 or 36 months
* “Reinvestment fees” (on top of mortgage penalties)
* Interest rate differential (IRD) penalties based on an onerous bond yield calculation
* IRD penalties on variable-rate mortgages (usually IRD penalties apply to fixed mortgages)
* IRD penalties based on a costly posted vs. discounted rate formula
* Inability to port unless the purchase and sale take place on the exact same day (which can be hard to arrange)
* A poor conversion rate guarantee
* No refinances during the first year
* No free switches (for transfer-eligible mortgages)
* Amortization limits of 25 years
* Minimum amortizations of 15-18 years
* Restrictions on converting from a variable rate to a fixed rate for the first six months
* No ability to break your “open” HELOC without a penalty
* Inability to port across provincial lines
* High administrative fees when porting
* 100% clawback of cash-back if the mortgage is broken before maturity
* Requirement for a full banking relationship with the lender
* No lump-sum pre-payment privileges
* No annual payment increase allowance
* Pre-payments restricted to one specific day a year (instead of any payment date)

And the list could go on…

Keep a lookout for restrictions like this when comparing different mortgages.

It’s even more important when sizing up cut-rate mortgages because the lower the rate, the greater the likelihood that a mortgage will be somehow restricted.

from www.canadianmortgagetrends.com

In a variable at Prime -.10 or higher?

2010-09-27T11:33:00.000-07:00

Did you redo your mortgage in the last year or so? Did you choose a variable rate mortgage? Are you in at Prime -.10% or higher i.e. Prime +.20%?

Then it's definitely time to look at a full review of your mortgage. There's potential of HUGE savings in interest by simply doing nothing different than what you're doing right now.

Below is an example of an email I sent to a client not too long ago doing a standard yearly review of their mortgage. One of the many services incorporated for free when you choose me as your trusted mortgage adviser!

Just today I read an article by Yves St-Maurice, Desjardins’ Director and Deputy Chief Economist and one thing that really stood out was this comment - "We’ll likely see no further Bank of Canada rate hikes till spring, and probably no more US rate increases "before 2012..."

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"Looking back you are in a variable situation at Prime +.30% (3.05% today). In the last year the discounts off of prime have come down quite a bit. We’re looking at Prime -.70% now (2.05%). This is a full percentage point less than what you have now.

Seeing how just yesterday I read a report that the predictions on prime to raise in the next couple years has been dropped to about 1-2%, the thought of you locking in is probably not in your best interest long term. Today’s lock in rate at your lending institution on a five year is 3.99%, almost 2% higher.

Here’s what I propose you should do to take full maximum affect and pay down your mortgage much faster without no changes at all to what you’re doing today.

With the rate being a full 1% lower, the monthly payment would decrease by approx. $96/m. If you kept your mortgage payments at the exact same level you’re at now, you would decrease your overall amortization by 4.5 years! This is a huge interest savings. Now if you were to increase your payments by say $200/m, overall just an extra $100/m, your overall amortization will decrease by just over 8 years! Huge potential for savings.

The cost of doing this and breaking your mortgage is roughly $2,850. This will be recouped within 10 months.

Overall this could be very beneficial to you and your overall goals. And will guarantee to save you a large sum of interest overall, leaving far more money in your pocket."

Sounds pretty good!!

Call or email me for more information and to see if this is the right way to go for you. 604-786-9099 christos@bcmortgageinfo.ca

BMO's 'low frill's mortgage

2010-09-20T10:05:00.000-07:00

You may see this crazy low rate from BMO being advertised out in the market.

As usual things aren't always as good as they seem.

There are so many ties to the mortgage that you as a consumer should be fully aware of.

Here's a few of them:
-The only way to get out of the mortgage is buy a bona fide sale of you home
-I read this morning that you actually have to qualify at a much higher rate of 5.39%. So very hard to qualify for
-Pre-payment privileges are sliced in half
-Max amortization is 25 years which can hinder a strategic plan of obtaining a longer amortization. Read more below on this.
-No skip a payment option needed if really needed. So this may put you in default if the need ever arose.

These are the main reasons why this mortgage may not be for you. Please consult with a professional mortgage broker such as myself to weigh in on ALL your options. Not just one lenders option. Right now I have access to the same rates with all the options!

In regards to the longer amortization as part of a strategic plan.
Especially if you are not paying for the option to have a longer amortization I like to explain to my clients that it's not a bad option to take. The reason is that you will always have that lower payment to fall back on in case you were in need of some extra cash flow per month. Lose your job etc. The key though is to pay your payments from the start at what the 25 year amortization would be.

I myself took a 30 year amortization on my mortgage and have taken advantage of increased payments etc. and have dropped my overall amortization by almost 10 years.

Canadians in good shape!

2010-09-20T09:23:00.000-07:00

Here's some interesting results that were received in a recent study sponsored by Genworth Financial:

Sixty-five percent of homeowners pay off their credit card balances each month (versus 48% of non-homeowners). Furthermore, a quarter of those homeowners with mortgages have managed to make a lump-sum payment or accelerate their mortgage payments in the past year.

Nearly half (44%) of homeowners were able to pay all of their bills and save some money in the past year, suggesting a strong correlation between home ownership and financial fitness.

The Financial Fitness survey was conducted in conjunction with the Canadian Association of Credit Counseling Services. Compared to the same survey undertaken in 2007 when the economy was booming, Canadians are even more likely now to say their financial fitness is good (55% versus 50%).

Other key survey findings show:

• Mortgage holders more likely to have accelerated or made a lump-sum payment include those with incomes $75-$99k (32%) or $100k+ (30%), and women more than men (26% versus 21%).
• 49% of homeowners made down payments of 20% or more on their purchase
• 13% of homeowners say they are in great financial shape
• 12% of homeowners say they have requested a credit report within the past 12 months
• 59% of Canadians say they pay their credit cards in full each month
• 39% of Canadians say that in the past year they were able to pay their bills and save some money. A further 41% were able to pay their bills but not save
• First-time buyers/those who intend to buy a home as well as those requiring mortgage insurance are more likely to have spoken to a financial planner/coach in the past 12 months

Variable and fixed rate forecasts

2010-09-01T12:09:00.000-07:00

Big bank economists have chopped their rate-hike forecasts again. TD made the biggest adjustment earlier today. It slashed its 2011 year-end overnight rate estimate by one whole percentage point. This underlines how dramatically expectations can change in just a few short months.

On average, major economists now expect a 150 basis point increase in the overnight rate over the next 16 months. Their outlooks, if accurate, imply a 4.25% prime rate by December 31, 2011. Prime rate is currently 2.75%.

Based on a 70 basis point average discount from prime, this suggests 5-year variable rates in the 3.55% range by year-end 2011. That's lower than today's typical discounted 5-year fixed rate.

As for the next rate hike, the signals are mixed. Canadian bond dealers are all expecting a 1/4 point increase at the Bank of Canada's September 8 rate meeting. The financial markets, however, are pricing in just a 30% probability of a hike.

After the next rate increase, most analysts now seem to expect the BoC to pause for a while. "The coming policy pause could now easily last a year," says BMO.

Fixed-Rate Mortgage Forecast

Banks foresee 5-year bond yields climbing 127 basis points in the same 16-month time frame. That would put the 5-year yield at 3.41% by the end of next year.

Assuming a typical 120 basis point spread above yields, this suggests deep-discounted 5-year fixed rates could rise to roughly 4.61% by year-end 2011.

Know where your money goes

2010-08-23T10:19:00.001-07:00

Surprisingly, many people never develop a budget. As long as the bills are paid each month, and they're putting some money into savings, everything seems fine. However, a budget is an essential part of managing your finances.

To see just how important it is, take the first step. Carry a journal and a pen with you at all times for one month to record your expenses. It's easier to manage if you divide the pages into columns and title them with categories such as groceries, mortgage, eating out, entertainment and utilities. Then methodically track everything, no cheating.

Seeing your expenses laid out before you provides you with a thorough understanding of how your cash flows in and out of your pocket. You'll also discover some bad habits you didn't know you had - and get on the road to changing them for the better. Budgeting software such as Quicken makes getting started easy.

Overnight lending rate up

2010-07-20T09:22:00.000-07:00

The BoC did raise the overnight lending rate again as we knew they would. Remember we’ve been at the lowest ever, it’s imminent that they will go up. They don’t make it certain they will continue to raise rates.

As I’ve mentioned in the past, we cannot raise rates too quick especially when the US are not. If we jump the gun, past history has told us it doesn’t work and back fires on CDN.

Locking in to a fix rate is still not in the picture for me and shouldn’t be for you. Prime is at 2.75% and most of you are at Prime or below. Locking in today is around 4.2-4.4% depending on your lender. That’s 1.50%+ higher ALL going toward interest.

The strategy portrayed over and over is to increase your payments today to what they would be on a fixed mortgage. This will not only prepare you for any increases, it will knock down your principal much quicker and in the end you’ll be smiling more!

Here’s an article from the web:
The Bank of Canada raised its benchmark interest rate by 25 basis points Tuesday, the second straight time it has done so after keeping rates at unprecedented lows for more than a year.
In its latest policy decision, the bank opted to move its overnight lending rate to 0.75 per cent. The bank had previously raised its benchmark rate to 0.5 per cent in June after having kept rates at emergency lows since April 2009 in an attempt to stimulate the economy and spur lending.
In raising the rate, the bank moved to lightly hit the brakes on a Canadian economy that has shown signs of significant strength in recent months.
But the bank made it clear in its policy statement that it sees Canada's economy recovering more gradually than it did in its previous outlook in April. It now projects GDP growth of 3.5 per cent in 2010, 2.9 per cent in 2011 and 2.2 per cent in 2012.

The bank also made it clear that future rate hikes are not guaranteed.
"Any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments," the bank said in its statement.
Further rate hikes can't be ruled out, BMO economist Michael Gregory noted.
"The bank's forward-looking language does not preclude further rate hikes," he said.
"[But] the bank now has more wiggle room to raise rates ... if they want to. And we think they will."
The next scheduled date for announcing the overnight rate target is Sept. 8.

Minimizing your personal debt

2010-07-12T09:34:00.000-07:00

Determine if you're in the red or black

Minimizing debt means getting to know yourself better, financially. The first thing you want to do is find your net worth. Knowing your net worth is a valuable tool for monitoring your financial progress from year to year, and ensures you're headed in the right direction. Calculating it is quite simple too. You just need to gather information on what you own and what you owe.

1) In one column list your assets including home equity, cars, valuables, bank accounts and retirement savings.
2) In another column list all of your liabilities including mortgage, car loans, credit card debt and any other debt you may have.
3) Next, total the two columns and subtract your liabilities from your assets

You now know your net worth. Regardless of the amount, or even if it's a negative number, you have a starting point. Record the date on your calculation and go through the same process next year or even in six months. It can be a powerful motivator for reducing debt - a personal budget is a great way to help you achieve your goals.

Understand your credit score

2010-06-28T09:49:00.001-07:00

You know from first-hand experience that your credit score plays an important role when purchasing a home. But for many, its contents are not entirely understood.

Canada's two major credit-reporting agencies, Equifax and TransUnion, gather a financial history about you that includes information about your credit and bank accounts, public records that reveal bankruptcies or credit-related court judgments, and any debt that went to a collection agency. It may also include a personal statement from you regarding information in your history.

This information is used to generate a score between 300 and 900 which lenders then use to determine whether or not to extend credit to you. The higher your score the lower your risk.

You should request a credit report from both credit agencies at least once a year to ensure your information is correct. Visit equifax.ca and transunion.ca to learn more.

Credit cards used wisely

2010-06-14T09:30:00.000-07:00

HTML clipboardA credit card can be your ally when it's managed correctly. It can help build a positive credit score, get you out of a pinch, and even earn you rewards. On the other hand, poorly managed credit can be detrimental to your credit score, and cost you more than you imagined.

Keep these tips in mind:

Limit your number of cards: It's easier to keep track of expenses, and reduces the chance of a missed payment.

Transfer credit card debt: It's a goo idea to always pay your credit cards in full each month. If you are carrying a balance, a personal line of credit offers a much better interest rate.

Don't spend what you don't have: Use the convenience of a credit card only knowing the money is in the bank.

Be diligent with payments: Never pay the minimum only. Your original purchase could end up costing you twice as much.

Avoid missed or late payments: You could incur additional fees and a black mark on your credit rating

Analyzing Past Bank of Canada Rate Increases

2010-06-08T15:37:00.000-07:00

BMO Capital Markets recently made some interesting observations about the Bank of Canada rate hike tendencies.

Despite a limited sample size, BMO listed the following common traits from prior rate increase cycles:

Bank of Canada (BoC) rate hikes come in “clusters, moving across a minimum of two consecutive announcement dates. (If this holds true, the BoC will raise rates again on July 20.)
84% of the past 25 rate increases have been 25 basis points
The BoC has often paused its rate hikes during past tightening cycles--sometimes more than once in a given cycle
The BoC has shown it will tighten even with core CPI inflation below its 2% target (That’s largely because the BoC tries to anticipate inflation and because it takes roughly a year or more for rate hikes to work through the economy.)
Rates rose an average of 200 basis points over 18 months in the past four cycles

(Chart via BMO Capital Markets, Author: Michael Gregory, CFA, Senior Economist)

BMO says the Bank of Canada typically sets policy after heavy consideration of five “C’s:”

Core CPI (inflation)
Canadian dollar
Commodities
Cross-border exports (to the U.S.)
Crises (economic, financial, or geopolitical)

That last “C” happens to be a factor today, courtesy of the European debt crisis. Nonetheless, BMO says: “We judge the Bank’s scale will eventually tip to the domestic data side, and the new tightening cycle will toe the stylized line.”

In other words, BMO expects concerns about European debt to fade at some point, with the BoC continuing its path to more normalized (higher) interest rates.

Maximizing additional payments

2010-06-02T12:03:00.000-07:00

Additional payments in your budget:
It sounds like a great idea to make additional lump-sum payments annually or at the time of renewal, but you my be asking where does this money come from? Reworking your budget to set aside funds in a savings account is an effective strategy. Automatically pay into an account before you even begin to manage your budget, you wont even notice its absence.

Bonus time may have just come or is coming:
With the end of the year just past or your tax returns coming. Whether a set amount or an unknown windfall at this time, a bonus or tax return can often lead to, 'should I pay down my mortgage or go on that trip I've always wanted'? You have to really sit down and think about your overall situation. Paying down your mortgage is always a great option.

Increase your payment amount:
It may take some adjusting to work it into your budget, but increasing your monthly payment amount can save you thousands of dollars in interest over the duration of your mortgage and reduce the life of your mortgage by several years.

Increase the frequency of your payments:
While the most common payment plan is monthly, you may be better off making smaller payments more frequently. In this way you could reduce the amount of interest you pay and reduce your principal more quickly.

Pay more when you can:
If you chose a mortgage that allows you to make contributions outside of your regular payment date, taking advantage of it whenever you can offers considerable savings. You contribution goes directly towards your outstanding principal so your mortgage is immediately reduced by the full amount.

New mortgage rules simplified

2010-06-02T12:01:00.002-07:00

There's still some confusion so this should help clear it up a bit:

1. VRM (variable rate mortgage) and fixed mortgage terms less than 5 years are now qualified on the bank posted rate when the LTV is 80% or higher on a purchase or refinance. Today this rate is 6.25%.
If you are taking a five year fixed rate or greater, the qualifying rate is the contract rate. Today around 4.5%.

2. Minimum down payment for rental units is now 20%.

3. Maximum LTV (loan to value) is now 90% on refinances and 85% for stated income (can’t prove income).

4. BFS (business for self) are required to prove their income after year 3 of business when using CMHC insurance for their mortgage. Genworth has not yet emulated this restriction.

5. Realtors, mortgage brokers and commissioned BFS must prove their income with NOA’s (notice of assessment) or use high ratio (CMHC or Genworth) and pay a premium.

HST

2010-06-02T12:01:00.001-07:00

The information below is from the BC Government website, and should clear up any of the questions people had about its impact on their purchase.

‘Currently, new homes in B.C. are subject to the GST, and also carry an estimated two per cent embedded tax as a result of the PST paid on most construction materials.

Under the proposed Harmonized Sales Tax, new homes will be subject to the HST but the embedded PST will be eliminated because builders will be able to recover the tax paid on materials through input tax credits.

Used homes will not be subject to the HST.

An essential part of the BC HST will be a tax rebate for new homes.

A rebate of up to $26,250 will ensure that purchasers of of new homes up to $525,000 do not pay more tax due to harmonization than is currently embedded in the price of a new home.
New homes above $525,000 will be eligible for a $26,250 rebate.
This enhanced rebate represents a 30 per cent in the threshold and maximum rebate available.
New home sales will be subject to the HST
Sales of used homes will not be subject to HST
The Province is also proposing an enhanced rebate for new rental housing, similar to the enhanced rebate for new homes, to support the construction or substantial renovation of affordable rental housing in B.C.

The new rental housing rebate would ensure that, on average, new rental housing up to $525,000 would not be subject to any more tax due to harmonization than is currently embedded as PST in the price of new rental housing.
We will also provide a provincially-administered point-of sale rebate for residential energy, ensuring the HST will not increase consumers’ costs for oil, electricity, natural gas or propane used to heat or power homes.’

Will the bank be paying me?

2009-03-24T10:14:00.001-07:00

Not too likely, but now is the time to pay yourself !

All those people out there with Prime minus variables, you know who you are. Your interest rates are sitting anywhere from 1.5% to 2.1%. Much lower and the bank will have to pay you! All kidding aside, you should be paying yourself by keeping your mortgage payments high, paying off more principle currently. It’s prime time to shave years off of your amortization! Remember, your pre-payment money is dollar for dollar. No interest!

Why the long face Mr. Smith?

2009-02-09T08:55:00.001-08:00

On Jan. 8th, 2009 the Supreme Court of Canada handed down a decision making a form of the “smith manoeuvre” a tax avoidance move. While deemed not technically illegal, the court said it was an obvious attempt to avoid taxes. The government used a tax avoidance regulation (GAAR – General anti avoidance rule) to deem the manoeuvre an abuse of tax rules. The premise of the smith manoeuvre is to cash in your unregistered investments to pay the balance of your mortgage. You would then refinance your principle residence to buy back non registered investments. Previously, under CRA guidelines this makes the interest you pay on your principle residence a tax deduction.

CMHC premium tax deductible?

2008-12-08T14:34:00.000-08:00

Is the CMHC premium a tax deduction on investment properties?

http://www.cra-arc.gc.ca/E/pub/tg/t4036/t4036-07e.pdf

You can deduct certain fees you have when you get a mortgage or loan to buy or improve your rental property.

If the loans relate to the construction or renovation period, first read about soft costs on page 9.

Loan fees include:
¡ mortgage applications, appraisals, processing, and insurance fees
¡ mortgage guarantee fees
¡ mortgage brokerage and finders fees
¡ legal fees related to mortgage financing

You deduct these fees over a period of five years.

Deduct 20% in the current tax year and 20% in each of the following four years.

However, if you repay the mortgage or loan before the end of the five-year period, you can deduct the remaining financing fees at that time.

The number of years for which you can deduct these fees is not related to the term of your mortgage.

If you have standby charges, guarantee fees, service fees, or any other similar fees, you may be able to deduct them in full for the year you incur them.

To do so, they have torelate only to that tax year.

You can choose to treat finance fees you paid and the interest on money you borrowed to acquire depreciable property as capital expenses."

Understanding your credit score

2008-08-25T09:43:00.001-07:00

If you are in the market for a mortgage loan, you might have heard your mortgage broker refer to your Beacon Score and you may have wondered what they were talking about. If so, what they were referring to is your credit score which is a number that tells lenders how much of a lending risk you are. Your interest rate and fees are determined by your Beacon Score, so it is very important that you understand what it is and what things can raise and lower it.

Beacon Scores range from 300-900 with the average Canadian having one around the 720 range. Borrowers at the higher end of the scale get better rates, and those at the lower end get the less desirable rates due to their higher lending risk. It is interesting to note that only about 11% of Canadians have a Beacon Score above 800 and nearly no one has a perfect score of 900.

If your Beacon Score is below the magic number of 600, lenders will consider you a “B” client and will view you as someone with serious credit issues. If you find yourself in the lower portion, approximately 300-580, you will find that lenders place you in the sub-prime category for lending. This means you will get horrible interest rates and high fees on any loans you take out.

If you have bad credit, don’t despair. You can fix your credit over time by understanding how the Beacon Score formula works and making sure to improve those areas of your personal financial situation which will also increase your Beacon Score. Here are some areas for you to consider:

Payment History – 35% of your Beacon Score – This is based on your payment history over the last few years. With on-time payments it will rise, and with late payments of even 30 days, it will fall. Any bankruptcy, judgments, or collection accounts are in this area of your Beacon Score.

Current Debt Load – 30% of your Beacon Score - Your current debt load is how much money you currently own and how many different creditors you owe money to. It also takes into consideration how much debt you would have if you maxed out all of your available credit.

Age of Accounts – 15% of your Beacon Score – This is a rating based on how long your credit accounts have been open with longer being better. You want to ensure that you have at least 3 credit accounts which have been open for longer than one year for the best score.

Type of Credit – 10% of your Beacon Score – Bank loans, credit cards, and revolving debt accounts each impact your Beacon Score in a different way.

Credit Enquiries – 10% of your Beacon Score – Each time someone pulls your credit report your Beacon Score will temporarily drop. For this reason you do not want to make a ton of credit applications all at one time or prior to trying to obtain a mortgage.

There are overall three things which can kill your Beacon scores like no other. They are: bankruptcy or judgments, payments over 30 days late, and maxing out your credit cards. For the best Beacon Score possible your credit card balances should always be below 50% of your credit line, or 75% at the absolute maximum.

Another thing that can negatively affect your credit scores are erroneous entries on your credit report. Make sure you get a copy of your report on a regular basis and contest any entries which are incorrect.

By understanding how your Beacon Score is tabulated, you can help your score to improve prior to attempting to obtain a mortgage loan. By doing so, you can ensure that you get the best mortgage loan rate possible.

Gone are the days of 40 year AM's and 0 down

2008-07-28T09:27:00.000-07:00

So a couple weeks ago I had sent out an email saying that we have a deadline of October 15th to do 0 down mortgages and 40 year amortizations.

Well it seems as though that deadline was not a real deadline for most of the lenders. As of right now all lenders, except for a very small handful, have cut the program all together.

We have verification that one lender for sure will use the October 15th deadline and that's it.If you know of anyone wanting to get in with this, let me know immediately and we will have them pre-approved for a purchase by the deadline.

Selling your home for maximum profit

2008-07-01T09:35:00.000-07:00

When you decide it is time to list your home for sale, it is important to then work on getting the best possible sales price, and ultimately the highest profit from the sale that you can. To this end, there are four factors which will determine the price that your property will sell for. They are: location, price, condition and you’re listing agent. Let’s take a moment to look at each of these factors in-depth:

Condition
Your home’s condition is paramount when it comes to making or breaking a sale. Your home should be as clean as absolutely possible, and clutter free, at all times when the home could be shown to potential buyers. If your property is empty when you will have it on the market, then you might want to consider having the home “staged.” Staging is where you pay a company to come in and furnish your home in the best way possible to help buyers see the positive aspects of a home and notice less of the negative aspects of it. Staging a home can be completed for a couple thousand dollars and can greatly enhance its appeal to potential buyers.

The condition of your front and back yards should be impeccable as well. All trees and shrubs should be neatly trimmed, and flowers should be planted to make the home more inviting to prospective buyers.

7 Tips for flipping homes

2008-05-22T11:03:00.000-07:00

"Flipping" has been a popular buzzword used by real estate investors for the past decade or so. This article will specifically address seven strategies that sophisticated Real Estate Investors use.
Flipping Real Estate simply means buying a property and reselling it quickly, as opposed to holding on to a property long term as a rental. Flipping comes in several varieties, most of which are legal and profitable, some of which are not.

Flip Strategy #1: Buy, fix, and flip
Let's start with the most common form--the good, old "fix n’ flip." This involves buying a property that needs work, fixing it up, then selling on the "retail" market, that is, to a person who will live in the house.
This method is tried and true and works very well. You can easily make $15,000 to $50,000 on one deal, depending on your market and how good you are at finding bargains.
The danger in fix and flips is either paying too much or underestimating repairs. Be very conservative in your fix-up costs and length of time it may take to resell. Also, make sure you consider the cost of paying a real estate agent to sell the property.

Flip Strategy #2: Buy, refinance, and lease option
Rather than sell the fixed up property for all cash, sell for terms. Once you have completed the rehab, refinance the property at its new appraised value. If you did the math correctly, you should have little or no money in the deal. Sell the property on a lease with option to buy.
The rent payment from your tenant/buyer should cover your mortgage payment.
When your tenant exercises his option, you reap a larger profit, since you don't have to pay a broker's fee. If the tenant exercises his option after twelve months, you benefit from a lower capital gains tax rate.

Flip Strategy #3: Buy and flip "as is"
Don't like to do fix-up work? Consider selling the property "as is" as a light fixer upper. If the local real estate market is hot, you should be able to sell the property in poor condition just a little below market.
This is especially the case with houses in "transitioning" neighborhoods. Make sure, of course, that you acquire the property cheap enough that you can sell it below market quickly and still profit.

Flip Strategy #4: Wholesale
Strategy #1, the fix and flip, is very popular, which means there are a lot of investors looking for rehabs. You can buy the property cheap and sell it for just a few thousand dollars more to another investor without doing any work. You won't make nearly as much as the rehabber, but you will realize your profit quickly.

Flip Strategy #5: Pre-construction
In very hot real estate markets, prices are appreciating as much as 2% per month. If you time things right, you can put a contract on a pre-construction house or condominium, then flip it to someone else when the development is complete.
If it takes 12 months for the development to be complete, and the condo price is $500,000, you could make $100,000 or more in one year! Of course, the opposite is also true. You could end up losing money if the local economy tanks and you end up with a worthless condo that you can't sell for more than you paid. Use this approach very carefully.

Flip Strategy #6: Scouting
The Scout is an information gatherer, so not technically a property flipper. He is the "bird dog" who finds potential deals and sells the information to other investors. Many people get started as a Scout for other investors because it does not take any cash or prior knowledge to look for distressed properties.
The Scout finds a property for sale, gathers the necessary information, and then provides this information to investors for a fee. The fee will vary depending on the price of the property and the profit potential. The Scout can expect to make $500 to $1,000 each time he provides information that leads to a purchase by another investor.

Flip Strategy #7: Illegal flipping
Okay, I am NOT advocating this approach because it is illegal. Illegal property-flipping schemes work as follows: Unscrupulous investors buy cheap, run-down properties in mostly low-income neighborhoods. They do shoddy renovations to the properties and sell them to unsophisticated buyers at inflated prices.

In most cases, the investor, appraiser, and mortgage broker conspire by submitting fraudulent loan documents and a bogus appraisal. The end result is a buyer that paid too much for a house and cannot afford the loan.

Since many of these loans are insured, the government authorities have investigated this practice and arrested many of the parties involved. As a result, the public perceives this flipping to be illegal. The fact is, "flipping" (as I described in the beginning of this article) is NOT illegal.

Mortgage fraud in the process of flipping is what is illegal. So don't confuse the two. The other six ways to flip are very legal, very ethical, and very profitable!

Bank of Canada lowered rates

2008-04-24T10:53:00.000-07:00

Once again, as expected, the Bank of Canada reduced the overnight lending rate. This is good news for us in a variable rate mortgage as the rate went down another half a percent.

If you're in a variable and have been for the last year you've seen some great savings. If you've kept your payments at the original amount, the savings are even more drastic, in the long run, not up front. This will cut years off your mortgage.

No one knows how long it will take until the rate starts coming up, which is more than likely going to happen at some point in time. With fixed rates staying low, and potentially becoming lower, locking in in the near future will be a no brainer!

Take care

10 ways to pay your mortgage down quicker

2008-04-07T09:30:00.000-07:00

Tip #1 Seek the advice of a financial advisor who works for a set fee. Finding an independent financial advisor who works on a set fee, to work with you on your specific financial goals, is the best way to ensure that you get the best and the most unbiased financial advice. Rather than talking to someone at your bank or lending institution, who makes money based on their recommendations to you, work with an independent advisor who has nothing to gain from your decisions that you make.

Tip #2 Opt for a closed term mortgage rather than an open one unless you will be paying it off in full during the term. An open mortgage at a fixed rate of interest will carry a higher interest rate than a closed term mortgage will. Unless you need to pay off your mortgage during the term, it is always advisable to go with the closed term and know that you can always pay off the mortgage when you are looking at renewing without penalty. And, while you are in the term you can generally pay up to 10-20% of the mortgage without a prepayment penalty.

Tip #3 Pay your mortgage each week, or every two weeks. One great strategy to pay off your mortgage in a shorter period of time is to opt to pay your mortgage each week, or even every other week. Both options lower your interest paid over the term of your loan and also result in the equivalent of an extra month’s mortgage payment each year. Paying your mortgage in this way will take your mortgage from 25 years down to 21.

Tip #4 When your income increases, you should increase your mortgage payments. Let’s say you get a 5% cost-of-living raise each year at your place of employment. If you live like you never got a raise, spending what you did before the raise, and you send that extra 5% of your income to your mortgage, then you will never miss the money and your mortgage balance will drop a lot faster. This is a very painless way of paying down your mortgage without feeling like you are sacrificing your way of life in any way.

Tip #5 Pay down your mortgage with your income tax refunds each year. If you are in the position where you get an income tax refund each year, send that money directly off to your mortgage lender as an extra payment on the principle of your mortgage loan. You won’t miss the money in any way, and your mortgage will get a nice reduction which will save you a ton of interest over time.

Tip #6 Pay down your mortgage with windfall money which comes into your life. Just about everyone finds themselves with money they were not expecting at some point or another. Maybe you inherited some money from a distant relative or you got a nice holiday bonus at work? Take all of your extra windfall cash and send it, or a large portion of it, to your mortgage lender as a lump-sum payment towards your mortgage loan. Again, this is a way to whittle down your mortgage loan without feeling the pain of coming up with extra cash out of your month-to-month budget.

Tip #7 Maintain your payments even if you are able to renew your mortgage at a lower rate. When you renew your mortgage and find that you are able to get a lower rate (with the resulting lower payment) ignore the lower payment and continue to pay what you were paying before the new term took effect. All of the extra money paid will go towards the principle of your loan and once again you do not feel like you have to come up with extra money to make the extra principle payments with.

Tip #8 Round up you mortgage payments. Assume for a moment that your mortgage payment is $756 per month. You can very easily add extra principle payments on your mortgage by paying a more rounded number, such as $775 or $800 each month. Over time, by rounding up, the payments will lower your overall mortgage debt.

Tip #9 Squeeze extra money out of your budget or extra income. Most people have some money left over at the end of the month which is sitting in their checking accounts. Make a point to always squeeze out any available money and pay extra principle payments on your mortgage. Alternatively, if you have a second job or a way of earning extra income, use some of that money to pay down your mortgage.

Tip #10 Think about getting a variable rate mortgage. It has been shown that variable rate mortgages can save you money over time. If you can deal with the rate fluctuations, a variable rate mortgage is worth serious consideration.

US/Canada

2008-01-21T09:56:00.000-08:00

The U.S. subprime crisis developed over several years as borrowers with little or no income, little or no equity, and a history of not paying their bills were approved for subprime mortgages. To attract even more of these borrowers, Option ARMs (specialized Adjustable Rate Mortgages) were offered. These mortgages started with a very low “teaser” rate for the first few months or years, then the rate automatically “reset” to a much higher level for the rest of the term.
The popularity of these mortgages helped drive the U.S. housing market to very high levels. House prices rose rapidly and homeowners, thinking they could rely on this forever, started extracting equity from their homes to increase their disposable income.

A "perfect storm" in the U.S.

What happened in 2007 was a “perfect storm”. U.S. mortgage rates had been creeping up and were reaching levels that slowed demand for houses. House prices stopped rising as quickly and eventually began to fall. The teaser rate on Option ARMs began to reset in large numbers leaving many borrowers unable to afford the new payments. With house values on the decline, many borrowers discovered they owed more than their house was now worth. Their only option was to default, which happened on a massive scale.

The effect on the U.S. economy has been dramatic. The housing market is already in recession and the news will get even worse over the next few months. According to CIBC World Markets, by mid-2008 the likelihood is for home sales to decline by 40%, housing starts to drop by 55%, and house prices to fall by 12-13%, from their peak. Forecasters still expect the U.S. economy to avoid recession, but it will come very close in the next few months.

In Canada, the story is different.

In Canada, our Bank Act requires lenders to be more conservative than in the U.S. The percentage of subprime mortgages in Canada is substantially less. And, according to CIBC World Markets, the percentage of Canadian mortgages in arrears is still near record lows–in stark contrast to the U.S. where delinquency and foreclosure rates have risen notably in recent months.

The bottom line is, unlike the U.S., the Canadian housing market has not been artificially driven by poor lending practices. Our long-term fundamentals are solid. We have a growing population, energy and commodities are in high demand, personal incomes are increasing, job creation is strong, and consumer confidence remains high.

Of course, if the U.S. does go into recession, Canada will feel the pain too. This concern has kept the Bank of Canada from raising interest rates, which creates yet another benefit for Canadian homeowners. Not only do we still enjoy access to readily available mortgage funds with no major default problems—but due to the U.S. subprime crisis, our mortgage rates should remain low for the foreseeable future.

If you have any questions about the mortgage situation in Canada or about your own mortgage, please don’t hesitate to contact me. I’d be happy to sit down with you, provide any answers you’re looking for, and offer professional objective advice.

Tips for paying off your mortgage fasterTip

2008-01-14T10:09:00.001-08:00

#1 Seek the advice of a financial advisor who works for a set fee. Finding an independent financial advisor who works on a set fee, to work with you on your specific financial goals, is the best way to ensure that you get the best and the most unbiased financial advice. Rather than talking to someone at your bank or lending institution, who makes money based on their recommendations to you, work with an independent advisor who has nothing to gain from your decisions that you make.

Tip #2 Opt for a closed term mortgage rather than an open one unless you will be paying it off in full during the term. An open mortgage at a fixed rate of interest will carry a higher interest rate than a closed term mortgage will. Unless you need to pay off your mortgage during the term, it is always advisable to go with the closed term and know that you can always pay off the mortgage when you are looking at renewing without penalty. And, while you are in the term you can generally pay up to 10-20% of the mortgage without a prepayment penalty.

For the self employed person looking to hire?

2007-12-03T11:26:00.001-08:00

When you know exactly what you want for yourself or your business, the opportunities to acquire those things are easily recognizable.

Start by knowing what you want in an employee so that you can attract the ideal one.

Before you can even decide who the perfect team member will be, you must have a very solid idea of which tasks you would like them to perform.

Then, you need to profile the personality traits that will work well in your business.

Hiring your neighbour or relative because you are overwhelmed is not the way to build a strong team.

Couple highlites from the Federal Mini Budget

2007-10-31T10:30:00.000-07:00

Personal Tax ChangesLowest personal income tax rate — The mini-budget proposes to reduce the lowest personal tax rate,which applies to taxable income up to $37,178 for 2007, to 15% (from 15.5%), retroactively toJanuary 1, 2007.Basic personal, spousal and wholly dependent relative amounts — The mini-budget proposes toincrease the amount used to compute the basic personal tax credit to $9,600 (from $8,929) for 2007and 2008, and to $10,100 in 2009 (indexed for later years). The mini-budget also proposes that theamounts used to compute the spousal and wholly dependent relative credits will be changed to matchthe basic personal amount for each of these years.For a single tax filer with income over about $38,000, the above personal tax changes will provideoverall tax savings of about $240 in 2007.

GST ChangesGST rate reduced — The government proposes to reduce the GST rate to 5% (from 6%) as of January 1,2008. The mini-budget sets out transitional rules that are similar to the rules that applied when the GSTrate was reduced to 6% as of July 1, 2006, including the following general transitional rules:o If GST becomes payable, or is paid without becoming payable, before January 1, 2008, the 6%rate applies.o If GST becomes payable on or after January 1, 2008, without having been paid before that day,the 5% rate applies.o If GST is paid on or after January 1, 2008, without having become payable before that day, the5% rate applies.Specific transitional rules are introduced for certain types of transactions, including sales of real property,deemed supplies, imported goods and taxable services and intangibles and taxable benefits.Excise tax — To ensure that the GST rate cut does not affect the overall price of cigarettes and othertobacco products, the federal excise duty on these products will increase accordingly as of January 1,2008.Provincial sales tax harmonization — The federal government notes that it is willing to work towardfederal-provincial sales tax harmonization with the five provinces that still impose retail sales taxes.However, the mini-budget does not appear to offer the provinces any concrete incentive for doing so.

A little food for thought!

2007-10-29T14:02:00.000-07:00

I receive weekly emails from Jim Rohn, whose a great motivational speaker and I thought today's was something worth showing as it can pertain to everyone. Have a read!

Miss a meal if you have to, but don't miss a book.Some people claim that it is okay to read trashy novels because sometimes you can find something valuable in them. You can also find a crust of bread in a garbage can, if you search long enough, but there is a better way.Most homes valued at over $250,000 have a library. That should tell us something.Everything you need for your better future and success has already been written. And guess what? It's all available. All you have to do is go to the library. And there's probably a library in every neighborhood.Some people read so little they have rickets of the mind.I now have one of the better libraries. I admit that I haven't read everything in my library, but I feel smarter just walking in it.Don't just read the easy stuff. You may entertained by it, but you will never grow from it.The book you don't read won't help.Books are easy to find and easy to buy. A paperback these days only costs six or seven dollars. You can borrow that from your kids!It isn't what the book costs; it's what it will cost if you don't read it.

Overnight lending rate remains the same

2007-10-16T09:32:00.000-07:00

The Bank of Canada chose not to raise interest rates this morning which is a positive.
They feel right now we're cruising along nicely. I've attached the article written by the Bank this morning. The next meeting is December 4th.

OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 4 1/2 per cent. The operating band for the overnight rate is unchanged, and the Bank Rate remains at 4 3/4 per cent.
Against a backdrop of robust global economic expansion and strong commodity prices, information received since the July Monetary Policy Report Update (MPRU) indicates that the Canadian economy is now operating further above its production potential than had been previously expected. The core rate of inflation, which has been above 2 per cent for the past year, was 2.2 per cent in August. Total consumer price inflation fell temporarily in August to 1.7 per cent, having been above the 2 per cent inflation target since the spring.
Since the July MPRU, the outlook for the U.S. economy has weakened because of greater-than-expected slowing in the housing sector. The Bank has revised down its projection for U.S. growth to 1.9 per cent in 2007 and 2.1 per cent in 2008. U.S. growth is expected to pick up to 3 per cent in 2009.
The Canadian dollar traded in a range of 93 to 95.5 cents U.S. in July and August, but since then it has appreciated sharply to as high as 1.03 dollars U.S. In the Bank's new base-case projection, the Canadian dollar is assumed to average 98 cents, the mid-point of the range since the July MPRU. As well, there has been a tightening of credit conditions stemming from the financial market developments this summer. For Canada, the Bank assumes that the cost of credit for firms and households relative to the overnight rate will be 25 basis points higher over the projection period than it was prior to the summer developments.
Despite these tighter credit conditions, momentum in domestic demand in Canada is expected to remain strong. The combined effect of a weaker U.S. outlook and a higher assumed level of the Canadian dollar implies, however, that net exports will exert a more significant drag on the economy in 2008 and 2009 than previously expected. As a result, the Canadian economy is projected to grow by 2.6 per cent in 2007, 2.3 per cent in 2008, and 2.5 per cent in 2009. This growth profile implies that aggregate supply and demand will move back into balance in early 2009. Both core and total CPI inflation are projected to return to 2 per cent in the second half of 2008.
In line with this projection, the Bank judges, at this time, that the current level of the target for the overnight rate is consistent with achieving the inflation target over the medium term.
There are significant upside and downside risks to the Bank's inflation projection. On the upside, excess demand in the Canadian economy could persist longer than projected. This could come from two sources: higher growth in household spending than projected and lower growth in productivity than assumed. On the downside, if the Canadian dollar exchange rate were to persist above the 98 cent U.S. level assumed over the projection horizon for reasons not associated with stronger-than-projected demand for Canadian products, Canadian output and inflation would be lower. In addition, the effect of the past appreciation of the Canadian dollar on demand and inflation could be stronger than expected and the effect of the weakness in the U.S. housing sector could be greater than anticipated. All factors considered, the Bank judges that the risks to its inflation projection are roughly balanced, with perhaps a slight tilt to the downside.

Discounts off of Prime. (Variable rate mortgages)

2007-09-20T09:41:00.000-07:00

In layman’s terms, what is happening?

Adjustable Rate Mortgages are typically priced according to the current 30-day Banker Acceptances (BA), which are a very common short-term money market investment, guaranteed by the banks. A lender funding adjustable/variable rate mortgages would typically borrow money through a 30-day Banker’s Acceptance. The lender is then responsible for paying the yield (rate of return) to the investor who purchased the BA. This yield is the cost of funding mortgages (“Cost of Funds”) to the lender.

So, what’s happening to the BA yields?

This is where the story has become interesting over the past few months.
The failure of the U.S. subprime market worried money-market investors. In Canada, investors began to sell off investments creating a strain on the market. Those who remained demanded higher yields from the BA market as no one was sure as to how much of these BA’s were used to finance U.S. subprime mortgages, or subprime mortgages here in Canada or other risky ventures. Everyone was asking the same thing: What’s the risk exposure? A classic example of the market overreacting.

The resulting increase in BA yields increased the cost of funds for lenders who want to finance their Adjustable Rate Mortgages. Essentially it’s costing lenders much more money now to finance ARMs than it did 60 days ago.

The following is a comparison of 30-day Banker’s Acceptance yields over the past 60 days:

July 17, 2007: 4.54%
August 3, 2007: 4.60%
August 14, 2007: 4.75%
August 17, 2007: 4.92%
September 11, 2007: 4.98%
September 17, 2007: 5.04%

*Source: Bank of Canada (www.bank-banque-canada.ca)

So, in 60 days we’ve seen the yield on 30 day BA increase 50 bps.

Now consider the interest rate earned by the lenders on an ARM at Prime - .90%. Today that interest rate is 5.35%. When you compare this to the current Cost of Funds at 5.04%, which doesn’t include overhead, profit margin (or any origination fees paid to mortgage originators), one can see that it’s only a matter of time before prices for ARMs need to change.

How long will this continue?

Are we seeing the end of the days of Prime - .90%? Perhaps for a while, until the money markets settle down.
The silver lining in all this is that due to Canada’s continued economic expansion and the reality of an $80+ barrel of oil, our longer term bonds are in high demand. As a result, we might see some interest rate decreases on the fixed rate products.

Overnight lending rate (prime)

2007-09-05T09:57:00.000-07:00

Great news from the Bank of Canada today: No interest rate hikes.

The overnight lending rate (prime) will stay the same.

After watching the economic report this morning I feel safe to say that due to the crisis in the states, and the federal reserve in need of cuts, Canada may just follow, even though our economy is doing quite well. Time will tell. The credit crunch that is going on right now is making the Bank of Canada keep things where they are. The worse it becomes in the US makes it a better for us.

The next meeting will be October 18th.

What the Bank of Canada said this morning:

OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 4 1/2 per cent. The operating band for the overnight rate is unchanged, and the Bank Rate remains at 4 3/4 per cent.
Near-term prospects for economic growth outside North America appear to be slightly stronger than anticipated in the July Monetary Policy Report Update (MPRU), while near-term economic prospects for the United States are weaker than expected. It now seems likely that the adjustment in the U.S. residential housing sector will be more pronounced and protracted, exacerbated by recent developments in financial markets. On balance, this implies weaker demand for Canadian exports than had been expected at the time of the July MPRU.
In Canada, total and core CPI inflation in July, at 2.2 per cent and 2.3 per cent respectively, continued to be above the inflation target but generally in line with the Bank's expectations. The Canadian dollar has also largely traded in the range assumed in the July MPRU. At the same time, the pace of economic growth in the first half of this year was above the Bank's expectations. It now appears that the Canadian economy is operating further above its production potential than was estimated in July. Domestic demand remains robust, buoyed by a continuing strong labour market and higher-than-expected increases in home sales and prices. However, recent developments in financial markets have led to some tightening of credit conditions for Canadian borrowers, which should temper growth in domestic demand.
Against this background, the Bank judges that the current level of the target for the overnight rate is appropriate. However, there are significant upside and downside risks to the outlook for inflation. On the upside, there is a possibility that household demand in Canada could be stronger than anticipated, while on the downside the ongoing adjustment in the U.S. housing sector could be more severe and spill over to the U.S. economy more broadly. In addition, there is uncertainty about the extent and duration of the tightening of credit conditions in Canada and, hence, about the tempering effect this will have on growth in domestic demand.
The Bank will continue to closely monitor evolving economic and financial developments. A full update of the Bank's outlook for growth and inflation, including risks to the projection, will be set out in the Monetary Policy Report, to be published on 18 October 2007.

Update

2007-07-24T14:32:00.001-07:00

The latest rate news has the Bank of Canada looking very hard at raising the Bank rate by .25% in September, but there are many detractors who say that the incredible rise in the Canadian dollar is going to be the dampening factor on the economy, not interest rates. The longer term rates are holding steady. The news in the States has the rates staying where they are (less pressure on Bank of Canada, more pressure on our currency to rise).

Co-Borrower or Guarantor?

2007-06-17T12:00:00.001-07:00

What should I do?I was raised the question the other day from a great client: "What exactly is the difference between a guarantor and a co-borrower?" since many people use the term interchangeably.I replied with the answer. "Guarantors are required to sign for the mortgage, but are not on title to the property. While co-borrowers are required to sign for the mortgage AND be on title to the property. In the event of default, the lender/insurer can take immediate action against all borrowers, including co-borrowers, which is not always the case with guarantors."Just a little note. Guarantors can usually be taken off the mortgage within one year of the term. Only if there is a good re-payment history in this first year.

Fixed rates

2007-06-05T14:13:00.000-07:00

I guess we couldn't be blessed for such low rates any longer! Generally speaking though, rates are still quit low.

With the increase in the Canadian Dollar, and the rise of bond rates and other factors, the fixed rates have gone up by over half a percent in the last little while. I go away for a short honeymoon to come back to higher rates! The five year posted rate is at 7.20% today. We're not too sure what's going to happen with the fixed rates, however, the way things are going today they may go up a little more. Hopefully the Canadian dollar will lose some momentum and start to come back down, which is not the prediction by CIBC world markets. They expect the dollar to be on par with the USD by the years end.

Variable rate mortgages are looking even better these days.

80% Conventional?!

2007-05-03T15:18:00.000-07:00

Welcome to a new age of mortgage borrowing. All the rules have been thrown out and the new ones are being written every day, after years of the same lender attitudes that kept many people from home ownership.
The Bank Act has been amended as of April 23, 2007 to change the conventional financing ceiling from 75% to 80% of the value of the property. This means that no longer will borrowers be paying high ratio mortgage premiums provided they have either a 20% downpayment or 20% equity in the property. This will save thousands of dollars in fees that otherwise cut into a homeowners equity.
This new rule also applies to revenue property financing although lenders are a little bit slower to announce that they are willing to go the full 80%. Remember that Canadian lenders tend to run pretty conservative (read tight) when it comes to Canadians trying to make some money at Real Estate investing.
Note also the new relaxed rules regarding borrowers who are newer to Canada and who might not yet have a long career track record. With good credit the waiting time to qualify for a mortgage has been drastically reduced. It is immigration that will be driving the net growth in this part of the world and the lending community is recognizing this.
It is about time that the mortgage world became reflective of today's borrower. New Canadians, Self Employed, and people with smaller downpayments can all buy and afford a home today like never before. The mortgage lenders are rewriting the rules and the winners are the borrowers.

US Sub-Prime Market

2007-03-14T13:38:00.000-07:00

As this is extremely interesting news as we depend on a good US economy.
More and more people in the sub-prime market are defaulting on their payments making things extremely complex. With more and more defaults, and lenders straying away from lending to this market, there is an influx of property's on the market which is causing for drastically lower home costs. We can only wait to see what happens in the next few months. In our market up here, the Sub-Prime lenders are joining on board at a fast pace as we are still in a strong market. Hopefully we don't follow suit with our partners of the South.

How much can you afford?

2007-03-09T14:35:00.000-08:00

To answer the comment posted by 'anonymous'...
With some great new rules that have come out in the past few months, you can qualify for a minimum of 12% more of a mortgage with good credit. Longer amortizations up to 40 years, increases this number even more.
There is so much competition out there that it's creating more and more mortgage solutions for everyone. To get into a lot of detail would take too long. I can definately answer your specific questions on email or by phone, just let me know.

Introduction

2007-03-08T16:43:00.000-08:00

This is my first blog to make sure all works well.

If you need any questions regarding mortgages and so forth answered, please let me know here or by email christos@gitersos.com