Are you preparing to purchase a home?  Many people make 3 common mistakes right before applying for a mortgage.  In this video, we define these mistakes and give you tips on how to avoid them.  By avoiding these mistakes, you will make your home buying process smoother and your mortgage application stronger!

Don’t have cash for a down payment?  Don’t worry…if you have RRSP’s and you are wanting to purchase your first home…the Canadian Government has a program designed especially for you!  Watch the video below to learn how to use your RRSP’s to help purchase your first home.

This episode of the Mortgage Minute begins to decode the language used when applying for your mortgage.  Knowing “mortgage” language gives you a leg up when trying to understand your mortgage and how to personalize your mortgage to your situation.  This video explains the difference between amortization and term as it applies to your mortgage!

August 17th – Canadian 5 yr bond yields -.03bps to 2.58. The spread, based on 5 yr rate of 4.29% is 1.71.

August 13th – Canadian 5 yr bond yields -.05bps to 2.61. The spread, based on 5 yr rate of 4.29% is 1.68.

What does this mean?  Essentially, the yield, or rate of return on a bond, can be read through a yield curve: a pattern of yields on bonds.  The increase in bond yields is what experts watch.  If the bond yield continues to increase, the spread will continue to shrink and this could be a trigger for interest rates to rise.  Typically, lenders are looking for a new spread between 1.80 and 2.00.

]]> http://themortgageblog.ca/2009/08/canadian-bond-yields-may-signify-an-increase-in-interest-rates/feed/ 0 http://themortgageblog.ca/2009/08/financing-for-leaky-condos-now-what/ http://themortgageblog.ca/2009/08/financing-for-leaky-condos-now-what/#comments Sat, 08 Aug 2009 23:55:21 +0000 Zach Silverman http://themortgageblog.ca/?p=367 As many of you have heard, the BC government has announced the cancellation of interest-free loans for people responsible for fixing their leaky condos.

This has left thousands of people wondering how they will financing the repairs to their condos, if and when they are necessary.  With many, many buildings still not assessed for damages, the cancellation of the Reconstruction-loan program may lead to thousands of condo-owners needing financing for home repairs.

Although there are still options the standard financing options for people who can qualify for standard home loans, the people this strands are those that cannot qualify for conventional loans.  Especially with the falling property appraisal values, many people do not have the equity in their home to draw from.  Compound that with the tight economy and many job losses, many people are having difficulty qualifying for loans.  Hence, the need for the government-assisted, interest-free reconstruction-loan program.

Think for a minute about those who will receive an assessment of repair for $50,000 (although many repair bills come in as high as $80,000 per unit) without any idea where the funds are going to come from.  Unfortunately, many experts foresee a large number of these units going into foreclosure with their owners declaring bankruptcy because of a lack of funding options.

If you are in this position, information and action is key. There may be options still available.  Please consult your financial institution or mortgage advisor for possible options and information.

According to John Bordignon, Executive VP of Strategic Development with MERIX, there isn’t a lot of changes expected in mortgage rates in the near future. While the economy is recovering, it isn’t recovering as fast as initially expected.

In order for the economy to continue to recover, a number of factors need to improve, including :

• A decrease in unemployment rates and job-loss statistics
• A stabilization in oil prices
• The TSX is still fairly volatile, and needs to stabilize
• Stabilization of oil and other commodities at a price that will stimulate the economy
• Overall world economic stabilization

However signs of stability in Canada’s economy are evident in the bond and rate markets:

• Bond yields have improved over the last month
• The yields and spreads are now within the “comfort zone” of 1.8 to 2.0%.  The banks are comfortable with the spreads and will likely not change rates unless the spreads rise above 2.0%.
• Variable rate mortgages are settling in at between Prime +35 and +45

For all intents and purposes, we are on the road to recovery, how quickly we will actually get there and what the long-term consequences for the last 8-10 months will be is yet to be known.

When the marriage comes to an end, there are two obvious options concerning the home, 1) sell the property and split the proceeds according to your agreement and go your separate ways, or 2) one of the parties buys the other party out of the mortgage and thus the title of the property.

The first option is a straight-forward transaction, you put the house up for sale, sell, split the proceeds.  The second option is slightly more involved and needs further explanation.  The decision between the options is a personal one borne out of the specific circumstances of the parties involved.  Perhaps there are young kids involved that need to stay in the house, the market is down and there will be a loss on the property that neither party can afford, one party can afford to buy the other party out, etc.

Once the decision is made, how do you go about buying the other person out of a mortgage?  Well essentially, you are refinancing your mortgage using a single income (whomever is buying the other party out of the house) and qualifications, versus the original purchase which was joint.  If you are the one buying your partner out, the first step is to ensure that you can afford the mortgage payments.  This is imperative because the Lender will ask for proof that you are capable of covering the mortgage in order for you to apply on your own.  In addition to covering the mortgage amount, you will have to come up with whatever dollar amount you have agreed on to buy the other partner out, this may come out of the equity in your home if it is sufficient.

In essence, if you can afford the mortgage on your own, the most common means of buying out your partner post-separation and transferring title out of the joint name and into your name, is to refinance.

If you are not in the financial position to buy your ex-partner out of the house, and you agree to both stay on title and have payment arrangements, their is one warning to be taken very seriously.  Just because one person is responsible for the payments (even with a court-order), if the mortgage is defaulted on, both parties on the mortgage will be affected.

The most important piece of advice when dealing with a mortgage during a separation is to get informed! Know your options, talk to professionals about your options, and make an informed decision regarding your home and mortgage.

The average sale price of a home last month in Canada was $306,366. Based on a 25% downpayment and a 25-year amortization, your monthly payment would be $962.61 at 1.35%. Convert that to a five-year fixed-rate term and you’re probably going to have to consider a 4% mortgage rate and a monthly payment of $1,289.04.

Rates are rising fast. Most major banks upped their five-year rate by 40 basis points this week, although discounters were still offering 4% this past week. “It’s not a mass rush yet, but we are starting to see … people locking in. But variable rates are still so good,” says Joan Dal Bianco, vice-president of real estate-secured lending, TD Canada Trust. She stops short of questioning why a consumer would pull out of these “deals” that are no longer available on the market.

Try to get a variable-rate mortgage today and the best you can probably hope to get is 60 basis points above prime, or 2.85%. The landscape changed dramatically in October during the credit crunch. As the Bank of Canada lowered rates, the major banks reluctantly lowered prime because of the massive amount of customers with variable-rate products negotiated under the old, higher terms. “Bonds yields are going up rapidly and people are starting to realize the rates are going to go up,” Ms. Dal Bianco says.

Throw in the fact the Bank of Canada used the weasel word “conditional”(on inflation rates)when it promised not to raise rates until June, and you can understand why some
people think today’s record-low prime rate might not hold. But if you’re someplace between 60 to 90 basis points below prime, the rate is going to have to go up pretty fast to justify locking in today at 4%, even though that is just slightly above the all-time low hit last month for a five-year term. “I don’t understand why you would lock in,” says Jim Murphy, chief executive of CAAMP. “Sure, if they start to rise, but [Bank of Canada governor Mark] Carney says they won’t rise, so you’ve got another year at that prime-minus rate.”

Don Lawby, chief executive of Century 21 Canada, says even when rates do start to increase, they are not going to jump significantly right away. You are not going to get 4% on a fixed rate again, but double-digit rates seem unlikely. “The only logic two locking in would be for someone very sensitive to any rate change and they just want to be secure,” Mr. Lawby says.

But at what price? If you’re using the “feeling secure” logic, why not go for the 10-year fixed-rate product? Rates on that product can be locked at 5.25%, ridiculously low by historical standards. Yet fewer than 10% of Canadians consider a 10-year product.

There are some compromises you can make. For starters, there is nothing to prevent consumers from having a blended mortgage at most Canadian banks. Some banks will let you take half your outstanding debt and lock it in. Diversity is preached for stock portfolios, but few people seem to adhere to the same philosophy when managing their debt. Consumers might want to take their cue from business. Few companies would want all of their debt coming due at the same time — it presents too much risk. The other option is knocking down principal: Make payments based on a 4% rate and have that extra $300 go straight to your principal every month.

The bottom line is if you’ve got a deal on your mortgage, why would you give it back? Dusty wallet Double check your credit card statements. DW is in a bit of a skirmish with Visa over a taxi cab bill. Of course, DW is too cheap to use cabs, but does succumb to them to get to and from airports on vacation. Last trip, the family took an airport limousine and paid the $56 charge. Guess what? The same amount was billed a month later. So far, the taxi cab company has yet to produce a second receipt. In the interim, DW had to pay the second $56 charge.

Gary Marr, Financial Post Published: Saturday, June 13, 2009

Applying for a mortgage is the easy part: filling out paperwork, gathering financial documents, and signing mortgage commitments; however in these three easy steps, many people make mistakes.  Most of these mistakes are easily avoidable with some preparation and informed advice.  Below are the Top 5 Mortgage Mistakes people make when trying to secure financing for their home.

1. Failing to choose the correct loan product for their situation
2. Automatically renewing their current mortgage with existing lender
3. Signing documents without reading them
4. Taking it to the limit – running up credit
5. Not planning for your mortgage application

Failing to Choose the Best Loan Product for Your Situation

There are many different types of loans out there.  There are fixed-rate products, variable (ARM) rate products, line of credit products, 15 Year term, 35 Year terms, and more.  However, for every person looking for a mortgage, each has their own unique situation.  While one person would benefit from a variable rate product, their neighbor may be better suited to a fixed-rate product.  The moral of the story is to explain your current situation and future goals in detail to your mortgage advisor and ensure that he/she selects a product that best meets those needs.

Automatically Using Your Existing Lender, Without Consulting other Lenders

Although you may feel an allegiance with your current lender (financial institution which holds your loan, not your mortgage advisor), they may not be able to offer you the best products.  When refinancing or renewing, you must consult other institutions to make sure that what you are being offered is in fact the best rates and terms available.  Many times your bank will offer you posted rates in hopes of you signing the commitment without shopping around.  Make sure you do your due diligence when refinancing and renewing.  This is your home, your mortgage, and your money!

Signing Documents without Reading Them

Never sign documents without reading them.  If you are unsure about your understanding, ask for clarification from someone you trust, your mortgage advisor, lawyer, friends, family members.  Remember that you are the one entering into the agreement, you need to understand and agree with what you are committing to.

Taking your Credit to the Limit

Make sure that your credit balances are in your favor when in comes to your mortgage application.  Lenders are looking for an appropriate debt-to-income ratio.  In short: you need to have more income than you have debt.  Avoid running up a balance on your credit cards, pay-down existing debts as much as possible.

Not Planning for your Mortgage Application

If you know that you will be needing a mortgage, or refinancing your current mortgage you need to make sure you plan for it.  Make sure your credit is in order, if its not, start preparing it.  Do not make any purchases on your credit cards that you cannot pay off, if you carry a balance on your credit cards, start paying them down.  Refrain from making any large purchases before securing your mortgage.  If you are planning on buying a car, wait until after you have secured financing, as your debt-to-income ratio will rise and you don’t want this while trying to secure a mortgage.

Understanding how the mortgage process works and how lenders qualify your loan will help you avoid the above mistakes.  If at all possible, avoid all 5 of these mistakes, it will make your mortgage application process much less stressful.  Remember that the best way to be a successful homeowner is to learn how to manage your mortgage by making informed, responsible decisions!