Thursday 31 May 2012

More Canadians locking in low-rate mortgages, reducing debt

The Canadian Association of Accredited Mortgage Professionals (CAAMP) has stated in their spring release that an increasing number of Canadians are reducing debt by locking in low mortgage rates. This article from the Financial Post explores newly released statistics that show the efforts Canadians are taking to pay their mortgages down faster.

At one time, taking a mortgage at a variable rate seemed like the best way to save on a mortgage. Now, with rates at historic lows, even those who started out with a variable mortgage are renewing with a low fixed rate and a longer term. Facing uncertainty surrounding the direction interest rates will take later this year, locking in for a ten year term offers a sense of security a variable rate wouldn't necessarily provide. CAAMP's report shows that 14% of the 3.8 million Canadians holding a fixed rate mortgage made this choice within the past year. It is also reported that in 2011, Mortgage Brokers accounted for 26% of the overall market, showing the necessity for qualified mortgage advice.

In addition to taking advantage of low rates, a large percentage of Canadians are using pre-payment privileges to decrease debt. We learn that 23% increased the amount of their regular payments, 19% made lump sum payments and 10% did both. An encouraging 50% of borrowers pay at least $100 more than required on their monthly payments. Jim Murphy, chief executive of CAAMP, reports these statistics show that the majority of Canadians are in a position to safely absorb a potential interest rate increase.

Click here for the full article from the Financial Post.

Tuesday 29 May 2012

Maybe debt isn't so bad after all

One of the most discussed issues in financing recently has been the difference between "good debt" and "bad debt." It has been reported that Canadians' debt-to-income ratio is hovering around the 150% point, making financial analysts nervous. This article from the Financial Post gives some relevant examples of what constitutes "good debt" and how Canadians can use it to their advantage.

Unlike citizens of the United States, Canadians are unable to write off mortgage interest on their taxes. Still, there are methods Canadians can easily use to translate debt into profit. One example is the Tax Deductible Mortgage Plan, which converts a regular mortgage to an investment loan. This article also explores the benefits of using a line of credit to invest in capital markets. This is also classified as a "good debt," as the interest is tax deductible.

It is important to remember that the ability to borrow can improve an individual's financial situation, if used responsibly. Applying for a credit card will build credit history, a student loan can allow for a higher paying job, and a mortgage gives Canadians the chance to invest in their future.

For more information, or to find out if a Tax Deductible Mortgage is right for you, contact a qualified Mortgage Broker.

To read the full article from the Financial Post, click here.

Friday 25 May 2012

Lessons learned from a year as a home owner

Purchasing a first home is an exciting time, filled with new challenges. The process is an important learning experience, and this article from Moneyville's Krystal Yee explores several important learning points for first time homebuyers.

Once you are pre-approved for a specific mortgage amount, it can be easy to get swept up in the excitement and start searching for homes in that range. It is not necessary, especially for a first home, to borrow the maximum amount possible. Remember to allow room in your budget for the unexpected. It is always possible to upsize in the future.

As you start settling into your new home, it's tempting to want to make changes right away and make it your own. One point Yee stresses is the importance of saving for home improvement projects. When it comes to renovations, it is easy to go over budget. Yee suggests making a budget with a cushion of 10 to 15% and sticking to it, keeping in mind that more changes can always be made later.

Possibly one of the most important points touched on in this piece is checking up on your finances. Spend some time making sure your any debts are in order and that you have an adequate amount for a down payment, closing costs and other fees associated with a home purchase. Sending away for a free copy of your credit report is also a good idea. This way, you can review it yourself first and ensure it is up to date and error free, before applying for a mortgage.

For more helpful tips about buying your first home, talk to a qualified Mortgage Broker.

For Krystal Yee's full article from Moneyville, click here.

Wednesday 23 May 2012

Buy now, save later

For first time homebuyers, trying to save for a down payment and retirement simultaneously is a difficult task. Additionally, suggestions for what percentage of your income should be going towards each are constantly streaming in. This article from Moneysense acknowledges that each financial situation is unique, therefore, saving and spending strategies must be customised, just like household budgets.

One suggestion explored in this article is brought forward by Malcolm Hamilton, from Mercer, a human resources company. His strategy suggests putting 20% of your income towards the mortgage until it is paid in full, then applying that 20% to an RRSP. This method seems to be a workable option for most Canadians in their 20s and 30s, as purchasing a home is top priority.

Of course, when adopting the 20% strategy, there are several factors to consider. The strategy is based on an average Canadian income, and those with higher or lower incomes should adjust accordingly. Those with student loans and those who are part of a workplace pension program should take these factors into account.

Finally, taking on a saving strategy of this sort requires discipline. It is reported that although many Canadians are extremely focused when it comes to paying down debt, they don't necessarily apply the same standard to saving. It can be tempting to use that suddenly available 20% for other purposes. The article also stresses the importance of creating an emergency fund. For advice tailored to your specific financial situation, contact a qualified Mortgage Broker.

For the full article from Moneysense, click here.

Friday 18 May 2012

Yes, you can reestablish your credit rating

When applying for a mortgage, your credit rating is extremely important. It has the ability to dictate the type of mortgage and interest rate you will qualify for. For those who have experienced financial hardships such as bankruptcy or simply bad credit, their credit score can be seen as a bump in the road to home ownership. Thankfully, it doesn't have to be that way. This Financial Post article offers some tips for those looking to restore a credit rating.

First and foremost, start out small. Borrowing is based largely on trust, and applying for a large line of credit right away gives a lender the impression the bad credit cycle will start all over again. A secured credit card is a good place to start. In this case, you make a deposit to the bank to cover the credit limit. In essence, you are using your own money but using the card helps to build credit history.

It is easy to fall into the trap of using your new credit as much as possible, but this tactic is counter-productive. Try to keep the balance of any credit card below 30% of the limit, and never underestimate the importance of making payments in full and on time. It is also a good idea to avoid applying for multiple credit products. Each time an application goes through, your credit file is accessed. This also reflects negatively on your credit score.

For more helpful tips on reestablishing your credit rating, contact a qualified Mortgage Broker.

To read the full article from the Financial Post, click here.

Thursday 17 May 2012

Making An Offer on a Home

  It is important to remember when making an offer on a home that the offer to purchase is a contract. Putting emotions aside and protecting yourself is paramount. This article from Money Sense is a comprehensive guide for first-time home buyers and veterans alike. From the appropriate amount to offer, to the deposit, to getting everything in writing, there is more to making an offer than meets the eye.

The first task on your list should be educating yourself on the value of other recently sold properties in the neighborhood. If you have chosen to work with a real estate agent, s/he should be able to assist you with this. Knowing what similar homes in a similar location have sold for will give a good basis on which you can measure what is a fair offer for your desired property. You should also be informed if there are others interested in the property. The possibility of multiple bids can make a difference as to your first offer, and it is important to know your limits. A bidding war can drive the price higher than the mortgage amount you have set for yourself.

After your bid has been accepted, don't delay getting the offer in writing. Again, if you have chosen a real estate agent, s/he will work as an intermediary between you and the seller. If not, standard offer forms are available from real estate lawyers. Homebuyers are advised to not include too many conditions in the contract to avoid putting off the seller. However, the importance of acquiring a home inspection can never be understated. After the conditions have been agreed upon, a deposit will be expected, the amount of which often depends on the purchase price of the home. Remember, the deposit cheque should be made out to a third party and held until closing. At this point you can choose to turn to an experienced mortgage broker to help find the best possible mortgage rates and financing solutions to meet your specific needs.