Tag Archive for: RBC

The path of least resistance

I just love this quote, and really rings true when we are talking about your mortgage renewal. This is because it is so easy just to sign the mortgage renewal from the big 5 bank and get back to your day. Other than signing the renewal statement you don’t have to do anything else. However what you don’t realize is that you will be paying through the nose. The banks are counting on you to take the avenue of least resistance as this is how they will make the most money.

Here is the thing, the big 5 banks are very competitive with the broker channel when it comes to you taking out the initial mortgage in most cases. However when it comes to your mortgage renewal they are counting on you being lazy and just signing the renewal statement and returning it to them. In fact they get between 80-90% of the renewals back to the because people are lazy and also because they don’t know any better.

However there is a better way. The big 5 banks are going to send you a renewal statement at posted rates. As of today this means 4.79% for 5 years, 3.49% for 3 years or 2.79% for 1 year. Now depending on whether your mortgage was insured (CMHC or similar) or not, this could mean a rate from 1.84% 5 year fixed ( uninsured) or 1.59% (insured) through the broker channel.

Let’s use an example, say that your uninsured mortgage is coming up for renewal with one of the big 5 banks. Your balance after 5 years is 225K. So at 4.79% 5 year fixed your monthly payment will be $1,453.13 on a 20 year amortization. Now with one of my monoline ( that is what they call non bank lenders) can do it at 1.84% over 5 years, this will give you a payment of $1,120.53 on a 20 year amortization. Now here is the fun part, this will save you $332.60 a month or $19,956 over 5 years.

Now isn’t a little upfront work worth a possible savings of almost 20K over the next 5 years. Now the work is nothing strenuous, it’s just a little paperwork and possibly an appraisal if needed, but this is hardly anything compared to your potential savings over 5 years.

I look forward to hearing from you in regards to your mortgage needs.

Pat

p.s- You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.

p.s.s- I should tell you that I am licensed in Nova Scotia, Ontario(M18001555) & in British Columbia(BCFSA #504098).

Bank's overnight rate drops to generational low!

The Bank of Canada just lowered it’s key lending rate by three quarters of a percentage point or .75 basis points. Assuming the banks follow the BoC lead ( they have not always the past few months) that will make the prime lending rate now 3.25%. This latest act of desperation by the BoC is to prevent us from dropping into a deeper and more prolonged recession, because of a world wide economic crisis and a troubled U.S economy.

This is all in an attempt to increase the flow of funds and to increase consumer confidence. In layman’s terms it is supposed to give you (and businesses) incentive to go out and spend some of your hard earned cash. This will not result in an immediate reversal of fortune, that will take some time. The immediate result they are looking for is to generate some heat on the frozen credit market. In other words, they want to make it easier for businesses and consumers to access money to borrow.

What does this mean to the average Joe or Jane? Well if you have a variable rate mortgage (one that is tied to prime rate) or a line of credit, then your payments will go down. That is if your bank follows the BoC’s lead, and there is now evidence that they are not. Other than that, there is not really enough incentive to run to the mall with a wad of cash. People are still losing their jobs at a record pace, because their companies are suffering and trying to remain solvent. 

So what can you do? Try to improve your personal financial situation by eliminating your debts as quickly as possible. Call my office today for a no obligation debt analysis so you can see where you are at and to get an opportunity to get a plan to eliminate all your debts in a very short period of time.

Cheers,

Pat

 

p.s- You can find me on Twitter,Linkedin, Facebookand friendfeed.
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Who is calling the shots?

Unless you were living under a rock or had your head in the sand, you probably know that most of the central banks lowered their key lending rates yesterday by 50 basis points. This was in response to the ongoing financial crisis that seems to be gripping the world.

The strange part for us Canadian’s is that usually when the Bank Of Canada lowers it’s key lending rate, the major banks usually follow with the same immediate cuts to their prime rate. However this did not happen yesterday, the Bank of Canada drops the rate by 50 basis points and the major banks only cut their prime rate by 25! Their reason for the rebellion, they say according to a Globe & Mail article is that they are already feeling too much pain because of an increase to their lending costs.

How many billions of dollars were injected into our financial system in the past few weeks? How many more do they need? Our banking system is vastly different and more stable than  our friends in the US. Where they have hundreds of banks, we have 5 large players. 

These banks can not possibly be suffering as much as the small business owners and countless home owners across the country who really need the to reduce their borrowing costs. It just looks like they are putting their profits ahead of what is good for their clients.  I am hoping that this is only temporary, if they do this again, then what would we really need a central bank for if our banks are just going to march to the beat of their own drum.

Cheers,

Pat

  

Who owns your ass(ets)?

If you are like the average family, you probably have 2.5 kids, a house, a car or two and maybe even a cottage. You are most likely both working and counting down the years till you can kiss your nine to fiver good bye. You may even have a company pension and contribute to the Canada Pension Plan as well. Living the life of Riley right?

However when it all comes down to it, you also have a mortgage, a car loan, credit card bills, probably a line of credit as well. You’re thinking that’s nothing, you have plenty of assets! You have your house, your car, your cottage, and your investments. Hold on there, you may be mistaken on what is an asset and what is not.

Let’s take a quick look, you have a nice house, but it is not your asset if you have a mortgage, it’s the bank’s. Same with your car and your cottage. You’re thinking that this can not be right, and if this is your definition of asset, then you may need to upgrade to the modern version. 

Don’t get me wrong, I use to think like that too. It all changed when I heard this version from Robert Kiyosaki’s series “Rich Dad Poor Dad“. He says ” that an asset is something that makes you money”. Think about it, if you have a house with a mortgage, then it is the bank’s asset because you are making regular payments to them. Well you say that it is worth 250K and that you only owe 100K. If that other 150K in equity is not making you money then it is not an asset, unfortunately the same goes for your car(s), your cottage and possibly even your investments. 

How can you change all of this? Put your self on the debt elimination fast track. If you owe someone else money then they are in control. Once this is done, see about using the money you once used to service your debts to invest in an area that produces you an income. Cut the chains to the bank and take back the reins to your life. 

Please contact my office for a free no obligation debt analysis to see if that is the best solution for you. I was inspired by the actions of the CEO of Royal Bank of Canada Gordon Nixon in regards to his view toward rescuing Lehman Brothers in the States. 

Cheers,

Pat