I just read this article in the Globe and Mail, you can read it here. If not here is my take. Current stats seem to indicate that we are slowly changing from a seller’s market to a buyer’s market. The change is sweeping us from West to East. As the market was at it’s hottest in the oil rich Alberta. This is nothing out of the ordinary in the cycle nature of real estate.
Cheers,
Pat
It can reach the point where you don’t want to pick up the mail or answer the phone. There isn’t anything to look forward to anyway, who writes letter’s anyway? The daily mail invariably consists of a few pieces of colorful junk mail and yet another pesky bill to pay.
Believe it or not, those pesky bills are the ticket to your financial well being. The way you handle those bills can make a difference that you can measure on the bottom line of your family finances.
A good credit score ( and the higher the better) is rewarded with good loan rates and access to money when you need it. A low credit score can cost you extra, even on your home mortgage, where the debt is secured against your home. You may find your self refused credit, and just when you need it the most.
You should check your own credit score at least once a year, to insure that all the information in your life is accurate. You have a right to access your own credit record through services like Equifax or Transunion. There may be charges for mailing or downloading your file, but it can pay to know your own credit score.
It is helpful to understand what is behind that credit score: what impacts your score and what lenders are looking for when they check your credit.
When those pesky bills come in, ( even if it is a $15 department store credit card charge!) do you pay them on time? Your payment history is a significant factor in your credit score. If you have paid your bills late, had an account that has gone to collections, or heavens forbid declared bankruptcy, then your credit score will drop accordingly.
How much money do you owe? Lenders will look for a nice comfortable buffer between your debt and your credit limits. If your credit card or your line of credit are always teetering at the top of their limits, that is also likely to have a negative effect on your credit score.
How long is your credit history? Lenders will be interested to know how long you have been a borrower. If you have a long credit history with a good repayment record, you will score high in this component. A short credit history makes it difficult for lenders to assess your risk , however if you pay your bills in a timely manner and maintain low credit balances, these good habits can off set a short credit history.
Have you applied for new credit lately? A lender will be able to see if there have been other “inquiries” on your credit report. If you have requested new credit several times in a recent period, your score may be affected. Don’t worry about routine checks or inquiries from your existing lenders. These should not impact your credit score.
How much credit do you have and what types of credit do you use? Both too much and too little can lower your credit score. Lenders will be looking for a record of established credit accounts with good payment histories. Too many credit cards, or accounts with high interest finance companies can also affect your credit score.
So what does not affect your credit score? Personal information such as your race, religion, sex or marital status are neither recorded or scored in your credit history. Perhaps surprisingly, your salary, occupation and employment history are not relevant to your credit history.
This year, whether or not you intend to take out a mortgage, or borrow money, you should check your credit history and ensure that all the information contained there is accurate. You want to know what any future lender can see. Secondly make those pesky bills in your mail box you new best friend. Be systematic about your bill paying routine and reap the financial rewards!
Lastly if you require assistance in making heads or tails out of your newly received credit report, just let me know and I will be happy to translate it for you so you can understand it properly.
Cheers,
Pat
I just read this article here. The Americans have got them selves in a pretty sticky situation. As with every challenge there is a learning experience. So what can we learn from this?
1) Don’t bite off more than you can chew. If you can not afford it with out the use of “creative” financing then do not buy it.
2) Stop living off credit of any kind. If you are a home owner take advantage of our debt elimination program, other wise start rapidly eliminating your debt.
3) Make cash king. Save for your large purchases, most people really do not pay off those ” don’t pay a cent, no interest for 5 years” sales at the big box stores, before their terms start to kick in.
4) Improve your credit rating. It is easier than you think. Start by paying your bills on time, keep your balances well below your limits. However once paid off, keep them open, as your self control you show by keeping zero balances will help prop up your credit.
5) Start your own business. Get paid for something that you are good at. It is also a good tax deduction. See you accountant for full details.
6) Last but certainly not least. Learn to invest. Face it you are not going to work forever. Some day you are going to want to leave the working world behind. Make sure you are ready for it. Be a good student, read books like “The Wealthy Barber
If you would like us to help you eliminate your debt, just let us know.
Cheers,
Pat
p.s I also just discovered this great book on Amazon, “The Subprime Solution” Let me know what you think.
“A penny saved is a penny earned”, or so the old proverb goes. Of course, the value of a penny has changed somewhat from the time when your mother offered her wisdom on the value of keeping what you earn. Today, you could save thousands of dollars by simply making the right mortgage decision. If you are like most Canadian homeowners, your mortgage could be a gold mine of potential savings.
In the past few articles, we have talked about the importance of your mortgage as one of your most significant financial decisions. We have explored the value of seeking the advice of a mortgage professional whether you are buying, or renewing your current mortgage. Today, let us take a look at the bottom line, the savings that you can enjoy by making the right mortgage decisions.
It is the primary goal of a mortgage professional to find you the right mortgage product for your personal situation. A good mortgage professional is a financial professional and like your investment advisor, they want to understand your personal situation. Your mortgage professional has access to a wide variety of lenders, from institutional, trust to private, so they can help you to do some valuable comparison shopping for the right combination of terms and conditions to suit your needs.
All these choices offer you substantial opportunities to save money over the life of your mortgage.
If you are like most homeowners, you are focused and for good reason on finding the best possible terms for your mortgage. ( Notice I did not say rate!). A good mortgage professional will find you the best possible rates and terms to suit your needs. If we can talk about rate for a second, if I can save you 1% on your rate, that would translate to more thank 13K in interest per 100K borrowed over 25 years.
As I said there is more to it than just rate. There are other ways to find savings in your mortgage. A good mortgage professional is up to date with the latest terms and conditions, and we can custom fit a mortgage for your requirements.
As I covered in previous postings there are many ways to mine your mortgage for gold. If you are interested in how your mortgage may be used to help you live a debt free lifestyle, then ask us about a no obligation debt analysis. So we can show you how much sooner you can be living a debt free lifestyle.
Cheers,
Pat
More than a decade ago, trendsetters began to tell us about the future trend of “cocooning”. They predicted that decoration magazines, home renovation businesses and luxury home fashions and furnishings would see a big boom. However recently we continued to look outside our home for entertainment, and the idea of nesting at home seemed unlikely.
But the the futurists were right, and Canadians have come home en masse: to work ( as I am doing right now) to play, to socialize, and the retreat. Not surprisingly, they are reshaping their homes to accommodate their new passion for home life. Canada has become the renovation nation, with more than one third of Canadian homeowners planning a significant renovation in their near future ( just ask my wife) and according to CMHC. Even with our simmering economy sales for home improvements remain strong, just try to find a parking spot at your local Kent, Home Depot or Rona on a Saturday Morning. That “Honey Do List” needs to be tackled.
So where are people spending the money? People are still renovating their kitchens, but they have been overtaken by exterior renovations ( like landscaping, roofing, decks and fences) bathroom renovations ( anyone need a bidet?) and carpeting and flooring. Kitchens are now the 4th most popular. Do it your self renovations are most likely to tackle rec-room renovations or paining and wallpaper.
Before you embark on a renovation project, you should consider whether you are improving your home for your own comfort, or to increase the value of your home. Renovations are not created equal, and some will perform better than others when it comes to adding value to your home.
Most renovations will improve the value of your home, but you should not expect to fully recover your renovation costs. There are some exceptions and they often vary from one region to another. Go to the CMHC website as they provide a general cost vs value guideline. For example, you can expect to recoup up to 73% of a kitchen renovation, making it the smartest renovation investment. Followed by bathroom up to 71% then exterior work like landscaping or painting up to 62% and re doing the family room up to 56% of your investment.
But there is more to the renovation fever than a desire to practice trading spaces at home. The passion for home life is coinciding with the availability of attractive financing. A mortgage is one of the lowest cost of borrowing loans that you can get, and Canadians are taking advantage of this to do the upgrades that they have been dreaming of, rather than putting it on the credit card!
If you are thinking of doing a major renovation, then you owe it to your self to give us a call to find out about some of the financing options that are available. I look forward to hearing from you.
Cheers,
Pat
Just imagine as you are going through your favorite coffee drive through this week, that a well dressed gentleman stops and offers you $12K for your grande non fat no whip extra hot chi latte. Would you do it? I would take it even if it was the last coffee on earth! It’s a no brainer. Well what about this, what if you take that daily coffee budget and apply it to your monthly mortgage payment. Depending on your coffee taste’s you could be saving anywhere between $30-$85 per month, and that small amount could save you anywhere between $12K and $34K over the life of your mortgage.
Most of us can accept the idea that we must borrow money to purchase a home. We look for the best possible rates and terms, and then we are stuck just handing out our hard earned cash for as long as it takes to pay it off. With current amortization’s of 25,30 or even 35 years, that is a long time to be chained to your lender. If you don’t pay attention it will cost you over double the cost of your home to pay it off. However with a good strategy you should be able to burn your mortgage papers significantly earlier.
Here are a few tactics that you can put to use right now:
1)Pay more than your mortgage amount. Here is an example, say you take out a 250K mortgage over 25 years, at 5.35% paying $1,504 monthly. You find that you have an extra $250 that you can put toward the mortgage every month. By doing this you will save $42,950.88 in interest, and have your self 5.58 years closer to being mortgage free.
2)Take advantage of lower rates. By doing this you are reducing your overall interest costs and therefore paying down your principal faster. On easy way to do this is to take a variable rate. I know it is riskier but 9 times out of 10 you will pay less over the life of your mortgage.
3)Accelerate your payments. Most people are paid bi-weekly. If that is the case with you then pay your mortgage bi-weekly. This works out to an extra mortgage payment a year. If you combine this with example from tactic #1 and put $125 extra ever 2 weeks, you will save $104,174.95 in interest and now be 8.12 years closer to being mortgage free.
4)Use your lucky money, and by that I mean your bonus, tax refund, lottery winnings to pay down your principal. This will really help in the early years of your mortgage. Let’s still use the example above, say this works out to $1,500 worth of lucky money a year. Now you are saving $119,321.13 in interest and will now be mortgage free 9.77 years sooner.
5)Lower your over all cost of borrowing by consolidating all your loans. By combining your car loan, line of credit, credit cards, student loans etc into one low monthly payment and apply the savings to your mortgage. This will result in large savings in over all interest cost and becoming debt free a heck of a lot sooner.
If you want a idea of how this could help you personally, then contact my office and request a free no obligation debt analysis. We will show you how these strategies combined with a proper plan will have you well on the way to becoming debt free.
Cheers,
Pat
When it comes to mortgage financing, more and more Canadians are choosing to work with a professional mortgage broker. According to a study conducted by CMHC, over 25% of mortgages were originated by mortgage brokers.
Canadians are just catching up with our American neighbors, who are far less likely to just walk into their neighborhood bank for a mortgage. Over 70% off all American mortgages were originated by a mortgage broker.
If we follow the U.S. model and that seems most likely, then Canadian are in for changes in the way that they manage their most significant personal asset. It all makes sense, investment returns are not as lucrative as they were just 5 years ago and investors are looking for ways to make gains through avenues that they may have overlooked.
There are some significant benefits to working with an independent mortgage broker. Firstly, let’s compare mortgage expertise: Most banks have one or more representatives who are specifically assigned to assist with mortgages. Their role is to develop mortgage business for the banks. An independent mortgage broker on the other hand is a trained mortgage professional who has met standards for education. The comprehensive training of an independent mortgage broker may exceed the training of their counterpart at the banks. Most importantly the mortgage broker is independent. They are not employee’s of a lending institution, however they have access to terms and conditions for a full spectrum of charted banks, and other lending institutions. Their role is the find the best possible terms and conditions that meet your needs.
Let’s also look at choice: An independent mortgage broker offers you access to many competitive lenders, each with a range of mortgage options. It would take weeks of research, telephoning and personal visits to recreate the range of terms and conditions that a mortgage broker has at their finger tips. Rate information, mortgage options, and payment schedules are up to the minute, so you and your broker can make valid comparisons of the options available. The result of all this choice is a mortgage witch is customized to meet your needs and to save you money.
Also consider accessibility. Your mortgage does not sleep, just kidding, but we are available to you both before and after your mortgage closes. However if you prefer you can be put on hold or get put in an endless voicemail answering loop at your local bank.
Over all clients have turned to mortgage brokers for better terms and conditions. Access to a broad range of lending institutions is also a critical advantage to mortgage shoppers. If we can just save you a quarter point, that can save you thousands of dollars over the life of your mortgage. Many mortgage brokers work with large brokerage firms with sufficient mortgage volumes and that can help get you the best possible rates and terms for your mortgage. Canadian who have used a broker, are more likely to continue using one than to ever return to a world where they have to accept the best posted rate at their local bank.
For most Canadians, buying a home is the largest financial decision they will make in their lifetime. Yet, consumers across the country are more likely to painstakingly review dozens of investment possibilities for their portfolios than to scrutinize their mortgage choices.
The mortgage world like the investment world can sometimes be confusing. There is a vast array of choices, open, closed, fixed, variable or floating, long or short amortization, prepayment options, portability and of course the rate itself. Making the right mortgage decision can have a huge impact over the long term.
Many Canadians have an investment advisor to help them sort through all their investment choices. Now Canadians are also beginning to turn to Mortgage Brokers to help them make better mortgage decisions. We are just starting to catch up with our counterparts south of the border, ( American’s rather than Mexican’s for those with less then stellar geography skills) where mortgage brokers currently originate about 70% of the mortgages.
So what is a mortgage broker? ( See my last post or read on for a summary) The role of a mortgage broker is to understand your mortgage needs, seek out the best terms and conditions for your situation, and guide you through the lending process. A mortgage broker does not work for any individual institution or lender, but is independent, and has up to the minute terms for a wide variety of banks and other lending institutions.
There was a time when the banks exercised the view that they “ owned “ their customers, and mortgage brokers were perceived only as a last resort for consumers with less than perfect credit history. However times have changed, and consumers of every type are learning that they can benefit from the professional advice of a mortgage broker.
Just as a good investment advisor can make you thousands of dollars, a good mortgage broker will save you thousands of dollars. Whether you are buying for 1st home or your 5th, renewing your mortgage, or just looking for sound mortgage advice, then you should consider adding a mortgage broker to financial team this year!
For most of us, our ideas about mortgages have been installed by years of past experience with traditional products in traditional institutions. Long held beliefs sometimes include the idea that mortgage brokers are only for people who have less than perfect credit or have been turned down by a bank. Unfortunately, anyone with this kind of outdated thinking could be loosing thousands of dollars! All home buyers and home owners can save time and money by enlisting the services of a professional mortgage broker.
A mortgage broker has access to many competing lending institutions, including banks, pension funds, trust companies, and even private mortgage lenders. Since mortgage brokers do not have to sell the products of any one lender, they can be completely unbiased in recommending a mortgage that has the most attractive terms and conditions for their clients. While you may arrange a mortgage every five years or so, a mortgage broker and their firm, are completing thousands every year. This enables them to negotiate a better rate based on that volume, which is then passed on to their clients.
There are other potential cost savings. On any given day, a particular lender may have a special rate offer for a specific mortgage term. If you are rate shopping on your own and don’t know who is sponsoring the offer, you can’t take advantage of the special pricing.
At renewal, many homeowners take the renewal quote and choose a term and rate offered by the lender without realizing that a mortgage broker may be able to save them up to one percentage point off the posted rate. This can translate in thousands of dollars in savings over a five year term. To insure that you get the best rates and terms, it’s best to contact me at least four months prior to your renewal or your new home purchase. Starting early can be a money saver because I have lenders who will hold a rate for you for anywhere up to 90-120 days. Should rates drop prior to closing, or renewal, then you will get the lower rate.
If your credit rating is important to you, then you also need to consider that when you shop from lender to lender, there is an accumulation of inquiries on your credit bureau report, affecting your credit rating and ultimately the rate and terms of your mortgage. This is not the case with a mortgage broker who only does one inquiry yet can still get many competing lenders to quote your business.
Finally, an important misconception that should be discussed is fee’s. Some people think that using a broker will be costly, and that there will be upfront fee’s. In most cases there is not fee because the lender that provides the mortgage pays the mortgage broker a fee for originating and negotiating the mortgage. As your would expect, fee’s are required for client’s with impaired credit, for commercial mortgages or when private mortgage money is used. This fee compensates for the additional time and effort that is required to negotiate these mortgages.
As always please contact me if you have any questions.
Cheers,
Pat
Right now, your house is the best piggy bank you’ll ever own. Even in our current market conditions. If you’ve got some money in that piggy bank, you may want to take some out for your RRSP. Get it before the RSP season is upon us and you are pulling your hair out wondering how to maximize your contribution room or even catch up on all the unused room that you have left over. Markets are due for a comeback, home values are still pretty steady in most Canadian markets and mortgages are your lowest borrowing costs, “Carpe Diem”, as they say, seize the day!
Top off your RSP with the lowest borrowing costs available today, a mortgage. Even if your mortgage isn’t scheduled for renewal any time soon, it may be worth your while to call me to see if can work our in your best interest, no pun intended! With today’s great rates, a mortgage restructure may be just what the doctor ordered.
Canadians are a cautious lot when it comes to finances and we typically do not like to borrow money. However special consideration should be given to doing it for sake of your financial future. Remember you could be looking at a good tax refund almost immediately. If possible you can turn around and put that money back against the loan as soon as it arrives.
So borrowing for your RSP can make good financial sense. But if you are a homeowner, the special RSP loan option offered by some of the banks may not be your best option. The cheapest money you can get is the money under your own roof. Why you may ask is because a house is considered sound security and lenders assume lower risk lending money secured against your house.
Here are two possible scenario’s:
1) You need money to take advantage of all your unused contribution room. Call a mortgage professional like myself and I can show you how to use a mortgage refinance or a second mortgage to reach your retirement goals. Make your new money really work for you, and heck while you are at it get all your debt cleared up too. Combine your high interest loans and credit cards into one low interest payment.
2) Want to boost your RSP and leverage your non registered assets to do it? While the interest on an RSP loan is not tax deductible, you could discuss the following strategy with your financial advisor: First, if you sell your non registered investments and you contribute the proceeds to your RSP. Then, arrange a mortgage and repurchase your non registered investments. The interest should now be tax deductible because the money is used to purchase the investments.
Both strategies depend on your own personal situation, so be sure to consult both your mortgage professional and your financial planner before proceeding. Call me today, this could be in your best interest!
Cheers,
Pat