Tuesday, August 24, 2010

If you’re struggling with too much debt you’re not alone. It seems as if the whole nation has a borrowing hangover. For years, credit was easy and many people became overextended. But we now live in an era of austerity and it’s time to get our affairs in order.

The 5 strategies you may want to avoid:

The first advice of experts in the field is to be sure you don't make your situation worse by making common mistakes. In particular try to avoid:

Paying only the minimum payment on your debt as this will results in the amount you owe actually growing and your problems will only become worse.
Relying on friends and family as this can damage relationships with the most important people in your life.
Unscrupulous credit counselors that demand cash upfront or high fees for help they promise, but don't deliver.
Using new high-interest loan to pay off lower interest rate loans – while it may be easier to just have one payment but it will actually increase the amount you have to pay back.
Declaring bankruptcy – this can have permanent and severe consequences on your financial future, avoid if you can, especially when debt settlement may work for you...
Debt Settlement

For many people, working with a Debt Settlement company can actually be a great solution. You’ve probably heard a lot of advertising for these services recently, but what exactly do they do.

Debt settlement is the process of negotiating with creditors to get them to forgive a big portion of your debt. Why would a credit card company do this? Well, it’s not out of the generosity of their heart. They have made the financial calculations and determined they are better off knowing for certain that they’ll get paid something rather than not knowing at all if they will get paid anything.

Settlement companies work with individual consumers to determine a reasonable monthly amount that they can afford to pay against their debt load. The individual makes the affordable payment every month into a special-purpose account, and as these funds accumulate, the settlement company reaches out to creditors to negotiate a full and final actual settlement amount that they will take.

Typically, these companies have excellent relationships with creditors and are negotiating on behalf of thousands of people every day. The amount of savings they can obtain for consumers can be significant.

While each situation is different, it’s not uncommon for debt settlement companies to negotiate reductions of as much as 50% of the outstanding amount and help get their customer debt free in just a few years.

There are a many debt-settlement agencies, so the next question is how to find a legitimate and trustworthy company to work with? One great way to start is by calling your mortgage broker. . They offer a free, no-obligation consultation to evaluate your options. If a debt consolidation using equity from your hom ewill work they can help you . If not, they usually can refer you to a lender with a low interest consolidation loan can be made.
To learn how much of your debt can be reduced, and how quickly you can be debt free, visit my website at http://mortgagealliance.ca/davidcooke
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The Mortgage Girl Newsletter

Not that there are a lot of people buying houses these days, but the answer to the age-old question of whether to go long or short on your mortgage is unclear yet again.

The Bank of Canada’s second quarter-of-a-point rate increase in the past two months is likely not going to do much to boost a real estate market that saw sales drop almost 20% across the country in June from a year ago.

The popular variable-rate product tied to prime that helped people buy a lot more house with more debt is going up too. The prime rate at the major banks, which tracks the Bank of Canada’s rate, is now at 2.75%.

But a funny thing happened as the Bank of Canada was raising rates. With much of the credit crisis seemingly behind us, the discounts on short-term borrowing are increasing as the cost of funds for banks also fall. Instead of borrowing at 100 basis points above prime, it’s now 70 basis points off prime.

At 2.05%, a variable-rate product today may look as attractive as ever, but the five-year fixed-rate closed mortgage is falling fast. It can be had for a shade under 4%, says Rob McLister, editor of Canadian Mortgage Trends.

“Bond yields have fallen out of bed and nobody expected that,” said Mr. McLister, adding the spread between the five-year Government of Canada bonds and five-year mortgages is still large enough that the banks may reduce long-term rates even more. However, at about 4%, the five-year closed fixed-rate mortgage isn’t far off its record low.

Bank of Montreal senior economist Sal Guatieri does agree that variable-rate products have worked out better than fixed-rate mortgages throughout history, but says the tide may be turning.

“Given that the central bank has already raised rates a couple of times now and will likely continue to raise rates, it probably is a correct assumption to make,” says Mr. Guatieri, noting the variable product usually works in a declining interest-rate environment. “The next five years might not quite follow the past. You could probably argue it’s wiser to lock in now. It’s a close call.”

Bank of Montreal is forecasting another 25 basis point move in September and says rates will climb another 1.5 percentage points by the end of 2011. If Mr. Guatieri and others are right, by 2012, the variable-rate products out today would clock in at just above 3.75%, if the discounting remains the same.

“If you are still in that variable-rate product then, you’d have to sweat out the next three years because there would still be possibly more increases,” says Mr. Guatieri, who adds his bank sees the overnight rate eventually going to 4% in the following three years. Based on the present gap between the Bank of Canada and prime, that would place the variable-rate product you get today at 6% by about 2015.

Fears of such a scenario are driving people into fixed-rate products again. That, plus new mortgage rules that make it easier to qualify for a mortgage if you go for a fixed-rate product with a term of five years or longer.

“The Bank of Canada is doing what it said: It’s going ahead with rate increases. If I was counselling someone, the prediction is rates are going up, so now is a good time to consider locking in for a term,” says Don Lawby, president of Century 21 Canada.

It makes sense, but with variable rate still at about 2%, it’s easy to see why people wouldn’t want to lock in. Even Mr. Guatieri says if you are secure in your financial situation and don’t need to fix your mortgage payments, “you might just want to let it ride.”

There just never seems to be a clear answer on whether to lock in or stay variable.
My take on this is that even at 3.75%, a variable rate is the way to go. Fixed rates are down in that neighbourhood right now but as I can get you in at 2.75% now, you can pay off huge amounts of principal right now by upping your monthly payments by a couple of hundred dollars. As the interest rate goes up you will be used to paying $200 a month more so it will not feel like an increase until you get up over that $200 threshold.
With fixed rates at historic lows, you can't lose which ever way you go. It is best to talk to a mortgage professional before you make an important decision like this. Call me at 403-836-1201 or apply online. Let's make this decision together.

Friday, August 13, 2010

Finally some good new from Europe

Today news came out that the Euro zone had experienced its best GDP gains in 3 years. Why is this good news to Canadians? Interest rates tend to go up when there is turmoil in the world's financial markets. Greece's near default of it's national debt and the subsequent bail out put many countries finances under the microscope. Spain and Italy also had dangerous amounts of debt. Just last week critics were saying that we might have a double dip recession due to the weak recovery in the US and the fact that the Chinese economy seemed to be slowing down.
Today's reports are a lot more optomistic. Will oil prices go up? Will the TSX and the Dow Jones go up? It's hard to say but it may mean lower interest rates will stick around a bit longer. http://bit.ly/cXVcmC
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Monday, August 9, 2010

CALGARY REAL ESTATE BOARD | Protect Yourself Against Mortgage Fraud

Protect Yourself against mortgage fraud. If you buy a house as a staw buyer and the mortgage goes into default, the bank will come after you. The $5000 that fraudsters offer you for using your good credit will not be worth the months of legal battles and possible jail time you face.

The Calgary Real Estate Board issued the attached news release on how to avoid mortgage fraud. Take a minute to read this over.

CALGARY REAL ESTATE BOARD | Protect Yourself Against Mortgage Fraud

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