Friday, December 16, 2011
Variable rate mortgages have been the choice for many Canadians over the last decade or so. Many Canadians have benefited over the years by having a variable rate mortgage and therefore saving thousands in interest cost.
Times have changed. Variable mortgages are now around the 3% mark but 3 and 4 year term fixed rates are as low as 3.09%. The question of course is when are the prime lending rates going up? Of course no one knows for sure and while the European sovereign debt crisis continues to loom large, most believe that it is only a matter of time before the whole crisis is in the rear view mirror. It’s been decades since the short term variable rates were so closely aligned with fixed rate mortgages and of course it won’t last.
Your current mortgage situation is not like everyone else’s. Does it make sense for you to finally go fixed? Only by reviewing your current mortgage situation can we decide if it’s the right decision for you. I can also show you how to save thousands in interest cost at the same time and have your mortgage paid years sooner.
Remember it is not just the interest rate you have but the interest you actually pay that matters most.
Call me today and let’s get started.
Monday, December 12, 2011
Here's a report from Propertywire magazine that |I felt should be copied word for word. If you have any questions contact me .
A new report from CIBC Economics suggests that Canadians would be well advised to look at the full picture when reflecting on the housing industry. Simply, don’t be put off by the alarming headlines, but know the whole story- and all the details.
CIBC said in a report, “That is certainly the case when it comes to the highly debated ascent in household debt and the health of the Canadian residential real estate market. In both cases, any statement based on headline figures or average numbers can be hugely misleading. The truth is buried in the details—and there the picture is still not pretty, but much less alarming.”
While household debt levels in the country are high, they suggest they are not alarming. Data has put debt-to-income ratio at around 150%. CIBC says though, that that figure cannot be taken at face value. It has to be put in greater context- of the whole economy, saying that it is not the level of debt that is as important as the fact that the accumulation of debt has greatly decelerated. Canadians seem to be changing their attitudes towards debt, and are adopting appropriate behaviours to that end.
Like RE/MAX earlier this week, CIBC says that the stellar performance of the Canadian Housing market is a bit of a puzzler, when conventional wisdom and economic factors suggest that it should be taking a greater hit than it has. “The average price of a house has risen by 28% since reaching its recent cyclical low in January 2009, and it is now close to 50% above the level seen before the recession.”
What CIBC does underscore, is the dangers of identifying the national average price, as actually reflecting the average price in the nation. They centre on areas like Toronto and Vancouver, where high prices succeeded in skewing the national average. They remind Canadians that they housing market is made up of separate pieces, each with unique challenges and conditions. “Prices in the Canadian market and its sub-segments are higher than what can be explained by factors such as income growth, rent, and household formation.”
CIBC answers doomsday analysts who say that the market is overvalued, and set to crash, because there exist fundamentals to keep it afloat: “The fact that prices are overvalued today does not necessarily mean that they will crash tomorrow. After all, a violent market correction needs a trigger such as the sub-prime crisis, which ignited the US real estate meltdown, and/or abnormally high interest rates, as was the case during the 1991 property crash in Canada.”
Tuesday, December 6, 2011
OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at
1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.
Uncertainty around the global economic outlook has increased in the weeks since the Bank released its
October Monetary Policy Report (MPR). Conditions in global financial markets have deteriorated as the
sovereign debt crisis in Europe has deepened. Additional measures will be required to contain the European
crisis. The recession in Europe is now expected to be more pronounced than the Bank had anticipated in
October, as a result of increased deleveraging and tighter financial conditions, as well as necessary fiscal
austerity and structural reforms. For more information and to discuss whether a variable rate or fixed rate is best for you contact me
Tuesday, November 8, 2011
Rob Carrick, the Personal Finance writer for the Globe and Mail says that with the variable rate mortgages being sold at prime which is 3% why would anyone want this product. There are 4 year fixed rate mortgages available on the market now at 3% or3.09% so why take the risk. Rates are not going to go down so for the first time in 10 years Carrick is saying go fixed rate. If you want to discuss variable vs fixed rate and how it would affect your monthly payments call me and we'll talk.
Friday, October 21, 2011
Reuters News agency just released a poll of 40 economists that shows that most economists believe that interest rates will not go up until the third quarter of 2012. This means that people with variable rate mortgages will be able to keep their low rates for another 9-12 months. The vast majority of these economists lowered their expectation of a rate hike for the next 4 quarters.
Economists often do not agree but 95% of them feel that rates will stay the same at the next announcement for the Bank of Canada Overnight rate scheduled for the end of October. This is based on the belief that Canada's economy will continue to weather the recession storm. In addition they expect inflation to remain low so a rate increase to slow the economy will not be necessary. If you are thinking about going for a variable rate mortgage you should know that lenders lowered the discount on their mortgages from Prime rate - .40% to Prime -.10% this week. The difference between a fixed rate and a variable rate now stands at .39%.
If you want to talk to someone about which rate would be best for you, contact me and we'll review your particular situation and you can make an informed choice.
Thursday, September 22, 2011
o you have a variable rate mortgage or do you know anyone that does? They could be paying a lot more than they need to.
Prime rates have fallen or remained steady over the last two years and with the latest Bank of Canada decision (April 12th) still unchanged at 1%, most banks prime rates are still at 3%. If you or anyone you know has a variable mortgage that was taken over the last several years chances are they are paying too much and will continue to pay more unnecessarily…why?..... because.. a lot of variable mortgage taken out a few years ago were at prime plus .5% or even plus .75% meaning the rate would be 3.5% to 3.75%!! Today’s variable mortgage are priced at Prime minus .60%.. meaning your rate could go from 3.75% to 2.40%.. That’s a difference of 1.5% which could easily save you thousands and thousands over the next few years even with the penalty to discharge.
With interest rates expected to remain low over the next little while, there is no better time to have a look at your own mortgage and switch or refinance your mortgage along with your other debt into one easy payment. Your mortgage amount might be higher but I can show you how to pay it off years sooner while keeping your monthly cash flow the same which means even greater savings.
Call or email me today and let me show you how this is all possible through Choice, Convenience and Counsel that a true mortgage professional like myself can offer because……why pay more than you have to…. Visit my website to apply.
Wednesday, September 21, 2011
Governor Carney said yesterday that “given current material headwinds, the policy rate can return to its long-run level after inflation is projected to reach the 2 per cent target and output is projected to reach its potential”, highlighting the lack of urgency to tighten. The Bottom Line: Despite the upside surprise to core inflation, the Bank of Canada appears in no rush to tighten given the economic and financial market headwinds that are currently blowing. Low rate environment is here to stay for now. On the downside, low rates mean increase speculation and rising home prices. If you want to take advantage of these low rates and renew your mortgage early contact me to find out how much you can save.
Thursday, September 15, 2011
Mortgage Alliance is unlike many superbroker mortgage companies. Everyone in head office acts like they are from a small town. and like they are family. The president, Michael Beckette and several other people supported her on the run. They decided that as we benefit from the community it was time to pay back for the support of home owners over the years. As a result, a cross Canada motorcyle run was organized. This event involved several head office people as well as individual mortgage associates riding portions of the Trans Canada from Vancouver to St. Johns , Newfoundland.
At a number of cities along the way, gatherings were organized by the local offices to welcome the bikers. The first year about $60,000 was raised. Now, the whole compnay has rallied around breast cancer as our corporate charity of choice.
Please support us when we ask you to buy a bracelet or attend a local function to raise funds. While this started as a Mortgage Alliance effort, we want it to become a community event in every town the motorcycles drive through. Let's face it, every one of those towns is affected by cancer, let's band together to fight this horrible disease. If you would like to help or want to know more about next year's event contact me
Monday, August 8, 2011
I recently read an article written by a realtor in Orlando, Florida complaining about mortgage brokers not doing their job correctly. He suggested that you contact lots of mortgage brokers and then pick one.
This could cause a big problem. I don’t advise clients on real estate or law because I leave it up to the professionals who work in that field. In this case, the advice this realtor is giving could result in a ding to the client’s credit score which might prevent him or her from buying the property they really want.
Every time you contact a bank or a mortgage broker, they will obtain a credit report to determine what sort of rate you qualify for . Too many inquiries will lower your credit score and can result in you being denied financing.
The author further says that you should pick a local lender as the financing could be delayed if the lender is too far away. How far away is too far away? I don’t know, but I would suggest that if time is short you pick a lender who is fast. Some lenders in Calgary take a long time while other lenders in Toronto are quick. My suggestion is to leave it up to the mortgage broker.
Finally, I would like to add my suggestions as a mortgage broker. If you are looking for a mortgage broker check out their online presence. Do they seem knowledgeable? Do they write articles or just long winded advertisements. ? In Canada, one way to tell if someone has been in the business for more than 2 years is to see if they have their Accredited Mortgage Professional designation , the AMP.
This tells you that the broker is experienced and takes regular continuing education. In addition, they have taken an ethics course and have swore to put your interests first. (Keep this in mind if you are thinking about going to a bank to get a mortgage. Who do they work for? You or the bank? )
You can find a reputable mortgage broker by going to your provincial mortgage association, in Alberta this is AMBA , or the national mortgage broker’s association which is CAAMP for find a broker in your area. Remember that brokers are licensed for their province only. If you are buying a property out of province ensure that they are licensed for that province as well.
Using a mortgage broker is easy , they do the leg work for you and find you the best rates and terms for your particular situation. Mortgage brokers help take the stress out of one of life’s most important events, the buying of a home.
David Cooke is a senior mortgage consultant with Mortgage Alliance in Calgary , Alberta. If you require further information you can contact David Cooke at his website or on Facebook
Thursday, July 7, 2011
Genworth Financial Canada, a private mortgage insurance company which competes with CMHC announced today there that there has been a significant increase in the number of people planning to purchase their first home, moving from six per cent in 2010 to 11 per cent in 2011. The results are from an Environics poll "of those Canadians who are considering a first home purchase in the next two years, the most likely group to take the plunge include people under 35 (14 per cent), those with children (12 per cent) and those with incomes between $75,000 and $99,000 (11 per cent)." the poll states. This is good news for home owners. If more people get into the market,particularly first time home buyers, this will allow home sellers to get rid of their present property and move up to a larger home. What was even more interesting was Canadians opinion of financial literacy, understanding financial matters. 95% felt that schools should be teaching financial education. Something that surprised me was that 92% of peple felt that individuals should have a financial education before they can receive a credit card. What a great idea? If people had a better understanding of credit and how finances work we would probably have few bankruptcies and people getting in over their heads with debt. I would welcome this idea. If you have any questions about financing a home contact me . I would be happy to help you .
Tuesday, July 5, 2011
Having processed hundreds and helped our team process literally thousands of transactions in my career, I’ve come across so many different situations and it goes almost without saying that everyone’s situation is unique. Even more so, it’s important to note that as many things that this guide will educate you about mortgage products and the ‘right’ things to do to successfully obtain mortgage financing, there are also a few pitfalls that I’m happy to be able to help you avoid as well. Here’s a list of a few of the things that I’ve experienced in my career in helping clients with their mortgage needs… I’d recommend avoiding these during the timeline between starting the loan application process until your purchase, building or refinance transaction is complete:
Do NOT change jobs!
A job change may result in your loan application being denied by the lender, particularly if your new position pays less, you decide to go back to school, you’re shifting between fields of work, if by starting you’re placed on probation or if your income structure changes (lower base pay with commissions, full commission, etc…). I’ve seen this happen a few times and the main disconnect here is that borrowers believe that their loan is approved early in the process, lender’s won’t call to re-verify your employment prior to funding the loan. The reality is that lenders can, likely will and this could cause problems for you. Have any questions or concerns as they relate to your scenario? I’m here to help!
Don’t make any large purchases until your mortgage has funded!
A major purchase that requires a withdrawal from your verified down payment (furniture, electronics, vacations) or increases your debt load (vacations, car purchase, financing furniture, business loans, etc…) can result in your not qualifying for your loan. A lender may check or re-verify funds in the days coming prior to funding and your transaction could fall apart at the last minute.
Avoid switching banks or moving your money to another institution!
After your lender has verified your funds at one or more institutions, the money should stay there until needed for the purchase. Fund transfers can take time and if your money has “disappeared”, your approval could be cancelled on you. ** One exception of this is when you’re using invested funds (stocks, mutual funds) are held at a separate institution than your day-to-day chequeing account. As long as we can prove that you’ve owned the funds for 90+ days, we meet the federal anti money laundering requirement and you can safely transfer the funds between institutions.
If you have any questions please contact me .
Thursday, June 30, 2011
Today's Financial Post had an article on rising variable rate mortgages. Inflation for May 2011 figures came in today and they don't look good. The best bet now is that rates will go up but by how much? 1/4 or 1/2 a point would be significant for many home owners. Perhaps in response to this National Bank announced that they are cutting their discounted rate from Prime rate - .75 to Prime - .65 as of 10 pm tonight. If you want a 180 day rate hold for this lower rate you have to contact me this afternoon. Don't miss out on what have been the lowest interest rates in 111 years.
Tuesday, June 21, 2011
Today an article appeared with an economist saying that US housing prices will not be rising until 2014. What does that mean to the average Canadian? An opportunity.
We've all heard about Canadians buying homes in Florida and Arizona at a fraction of what they would have cost in 2008. It appears there's still an opportunity for those of us who did not take advantage of this earlier.
How can a Canadian buy a property in the US? As a foreigner you need to provide at least a 25% down payment. With prices this low 25% isn't a huge number and the monthly mortgage payments might be $250, more like a car payment.
How do you get the 25% down payment? If you own a home in Canada and have owned it since at least 2006 you probably have at least $100,000 in equity. A Calgary mortgage broker like myself can arrange a line of credit or refinance your home to get you the cash for this investment. If you are interested in taking advantage of a once in a lifetime opportunity contact me and I will be happy to help you.
Here's the full article.
U.S. home prices won’t rise consistently until 2014 amid continuing structural problems in the housing market, an economist argues.
In Capital Economics latest look at the housing market, economist Paul Dales says that the current double dip in the market won’t reverse course quickly. He argues that the low level of demand isn’t something that a general economic recovery can easily fix.
Rising down-payment requirements for homes are keeping first-time buyers on the sidelines, while widespread negative equity is making it difficult for repeat buyers to move up to more expensive houses. “These constraints on demand are structural rather than cyclical, meaning that even faster employment and income growth over the next few years is unlikely to lead to anything more than modest rises in home sales. In any case, in recent months the economic outlook has deteriorated,” Dales writes.
To make matters worse, Dales notes that the risks to his forecast are more to the downside than the upside. If the economy stagnates, with the unemployment rising back up near 10% and disposable incomes declining that would put further pressure on housing. Meanwhile, if markets begin pushing up Treasury yields that could send mortgage rates higher. “After a year’s lag every 0.25% rise in mortgage rates tends to reduce house price inflation by between 1% and 2% per year,” he writes.
Courtesy of WSJ Real Time Economics
Monday, June 20, 2011
The Bank of Canada unveiled a new polymer bank note series today at its head office in Ottawa. Information on the polymer material and advanced new security features was released, along with the images and designs of the soon-to-be-issued $100 and $50 bank notes, and the themes for the remaining notes in the series.
The $100 note, which is to be issued in November 2011, features images that focus on Canadian innovations in the field of medicine: from pioneering the discovery of insulin to treat diabetes, to the invention of the pacemaker and to the role Canadian researchers have played in mapping the human genetic code. Sir Robert Borden, Prime Minister of Canada between 1911 and 1920, in an updated portrait, remains on the front of the note.
The $50 note, which will be issued in March of 2012, features images of the Canadian Coast Guard Ship Amundsen in the North, reflecting Canada’s leading role in Arctic research. It also evokes the part that Canada’s northern frontier—with its vastness and splendour—has played in shaping our cultural identity. An updated portrait of William Lyon Mackenzie King, the Canadian Prime Minister between 1921 and 1930 and again from 1935 to 1948, is on the front of the note.
The notes will contain a number of unique features that expand the frontiers of bank note security and will make them difficult to counterfeit but easy to check. Most prominent are two transparent areas: the larger area extends from the top to the bottom of the note and contains complex holographic features; the other is in the shape of a maple leaf.
“The Bank’s objective with every new series is to produce a bank note that Canadians can use with the highest confidence,” said Governor Mark Carney. "The Bank is combining innovative technologies from around the world with Canadian ingenuity to create a unique series of bank notes that is more secure, economic and better for the environment."
RCMP Commissioner Elliott stated that, “These new and technically innovative notes will go a long way to deter the threat of counterfeiting in coming years.” He added that the RCMP will “continue to work with the Bank of Canada, and our policing partners, to maintain public confidence in Canada’s currency.”
In the next six months, the Bank will focus on raising public awareness of the coming note series. It will also continue to provide information to the cash-handling industry to help prepare the system for polymer notes, and will work to inform retailers, financial institutions and law enforcement agencies about how to check the new security features once the notes enter circulation.
Starting with the $20 note in 2012, the remaining bank notes in the polymer series will be issued by the end of 2013. The themes of the other denominations will be:
$20 The Canadian National Vimy Memorial—evokes the contributions and sacrifices of Canadians in conflicts throughout our history. (Portrait: HM Queen Elizabeth II)
$10 The Canadian train—represents Canada’s great technical feat of linking its eastern and western frontiers by what was, at the time, the longest railway ever built. (Portrait: Sir John A. Macdonald)
$5 Canadarm2 and Dextre—symbolize Canada’s continuing contribution to the international space program through robotics innovation. (Portrait: Sir Wilfrid Laurier)
The specific designs and detailed images of these notes will not be released until their official unveiling dates.
More information on the new polymer bank note series can be obtained by contacting Jeremy Harrison, Assistant Director, Public Affairs at 613 782-8782 or firstname.lastname@example.org
Wednesday, June 15, 2011
- 2011 TD Canada Trust First Time Home Buyers Report reveals Alberta buyers least willing to pay more than asking price on a home-
CALGARY, June 15, 2011 /CNW/ - Albertans are the most willing in the country to visit multiple open houses before they purchase their first home. In fact, one-third say that they will view more than 10 houses in their search (32% versus 26% nationally). This is according to the TD Canada Trust First Time Home buyers Report, which for the second year in a row found that the overwhelming majority of first time buyers in Alberta (97%) expect to buy their home for at - or below - the listing price. Despite viewing so many homes and being set on finding a home to purchase at or below the list price, Albertans are most likely to say they'll spend six months or less shopping for their new home (76% versus 64% nationally).
The survey also found that many house-hunters are flying solo on the house-hunt. In Alberta, 41% of first time buyers plan to purchase their first home on their own (rather than with a co-purchaser). Nationally, nearly six-in-ten men (57%) will buy on their own, along with 33% of women.
"A home is a very big purchase and it's great that so many feel financially equipped to take on the expense on their own," says Jessy Bilodeau, Mobile Mortgage Specialist, TD Canada Trust. "Our report found that Albertans explore their options and stick within their price range when looking at homes. This is important - especially for those buying a home on their own. If you buy without a co-purchaser, should your financial situation change, you are the only person legally responsible for the mortgage. Ensure your mortgage allows room in your budget to set some money aside for the future."
While people buying independently don't have to compromise with anyone about the features, location and type of home they're looking for, first time buyers realize they may have to make concessions because the perfect home may not exist - or at least not be in their price range. Encouragingly, the survey found that Albertans name price as the factor they are least willing to compromise on.
First time homebuyers are most likely to say they would not compromise on:
• Price (60%)
• Number of bedrooms (48%)
• Garage or sheltered parking (39%)
They are most willing to make concessions about:
• Proximity to recreational activities (84%)
• Layout of home (82%)
• Features of the home and proximity to shopping (both 81%)
Compared to last year, home buyers doing slightly less homework
Many first time home buyers in Alberta are doing their homework to prepare for the home buying process. Albertans surveyed were most likely to research mortgage options (83%), estimate the cost of heating and water bills (76%) and calculate closing costs (75%).
Though a significant number of buyers are still taking steps to prepare themselves, the 2011 TD Canada Trust First Time Home buyers Report found an overall trend that not as many buyers as last year were preparing themselves; findings in Alberta were consistent with this trend. Nationally, steepest declines were in terms of getting pre-approved for a mortgage (76%, down from 91%), speaking to a mortgage lender before shopping (72%, down from 84%) and arranging for a home inspection (67%, down from 85%). First time buyers were also less likely this year to learn about mortgage options (85%, down from 93%), estimate heating, electricity and water bills (78%, down from 85%) and calculate closing costs (77%, down from 88%) in 2011 versus 2010.
"The majority of first time buyers in Alberta are taking the right steps to prepare themselves. To make sure they've covered all their bases, I recommend all buyers speak with a mortgage expert," says Bilodeau. "From getting pre-approved for a mortgage to estimating closing costs and hydro bills when you move in, there are many aspects of the home buying process and home ownership that many first time buyers may not even consider. A mortgage expert can walk you through the process and prepare you for each step along the way."
Buyers take in tenants to pay off mortgage faster:
One quarter of Albertans surveyed (25%) bought or plan to buy a home with a rental unit. Three-quarters (73%) say they will use the income from the rental property to pay their mortgage off faster. Those who will not be putting the payments towards their mortgage say it will help them live more comfortably (15%) or they'll put it towards savings (12%).
Half of those planning to buy a home with a rental unit expect it to generate $500-$750 per month in rental income (50%). Thirty-five percent expect to earn $750-$1,000, while fewer expect to earn more than $1,000 (8%) or less than $500 (8%) in extra income each month.
"Taking in a tenant can be an effective way to supplement your income and pay off your mortgage faster," says Bilodeau. "For the quarter of Albertan buyers who are considering taking in a tenant, I'd recommend exploring flexible mortgage options. For more information on your options Contact me If you want to crunch some numbers my mortgage calculators can be found here.
Monday, June 6, 2011
Sometimes a parent decides to buy a place for their children while they hit the books in university or college. It can be a good alternative to paying thousands of dollars toward residence fees or rent. Just look at the math:
Student rent of $500 a month = $6,000 a year = $24,000 over 4 years of school.
That money could go to your mortgage instead as an investment for you.
In Ottawa, for example, you can buy an older one-bedroom condo for about $195,000. Or, buy a 2-bedroom for $240,000 and let your child's roommate help cover the mortgage by paying rent. Let's assume you pay 20 per cent down. Here's an example of what your monthly costs could total when mortgage rates are low:
Cost 1-bedroom 2-bedroom
Mortgage payment $800 $1,000
Condo fees $350 $450
Property taxes, maintenance $300 $400
Total: $1,450 $1,850
Think about it: if your child rents a place, your money is helping the landlord pay his or her mortgage and other costs. If you buy a place instead and rent it to them, you have a real estate investment with a guaranteed tenant: your child. If the investment goes up in value, you will make money. Just remember that those gains will be taxed.
Also remember, mortgage rates and other costs change, and these changes will impact the numbers and your decision.
Things to consider before you decide:
You can buy the property in your name, in your child's name, or both. If you buy the property in your name, you should consider:
• The rental income you charge can pay a lot of your costs. Just remember you have to declare that income on your tax return.
• As a landlord, you can also claim many of your expenses, including mortgage interest. Assess your costs carefully before you buy. They will vary with the local real estate market, mortgage rates and other factors.
• Plan for some vacancies. Your child (or their roommate) may not stay in the condo over the summer break. Are you really going to ask them to pay rent if they are living somewhere else for a few months?
• Remember that you will own a greater share of the equity as you pay off the mortgage. And, the value of the condo may rise over time. This can offset your costs. But whether you do more than break even depends on what happens to housing prices in the area.
There are other benefits, too. Your child won't need to look for a different place to live each year. They also won't have to worry about subletting every summer. And their furniture won't be coming back with them if they live at home over the summer break. Not a bad deal.
Remember: you may not make money if you buy a student condo.
But there are other reasons you may decide to go ahead. At the very least, you can provide your child with a nice place to live in a good neighbourhood while they go to school. Want to talk to a mortgage expert about this? Contact me and we'll go over the numbers.
Recently both the U.S. Federal Reserve (the Fed) and the Bank of Canada described the economic picture as “unusually uncertain.” And this was before the unrest in the Middle East and Africa and before the devastating development in Japan. Add to this scenario the recent downgrading of Spain and Portugal by Moody’s, and you have a world that is even more uncertain than “unusually uncertain.”
If the real measure of intelligence is what you do when you don’t know what to do, then the next few months will test the economic IQ of both the Fed and the Bank of Canada. Given the increased uncertainty, it is reasonable to assume that both banks will be extremely conservative when it comes to monetary policy.
While short-term volatility will continue to influence markets in the near term, the focus should be on the big picture, which is much more predictable. And this big picture is changing. The great recession gave birth to a dramatic shift in the engines of economic growth in North America, and any successful investment strategy must incorporate this information.
The near 3% growth rate projected for gross domestic product (GDP) in 2011 masks the dynamics of powerful economic forces pulling in different directions. A vibrant business sector will gradually take over an exhausted consumer and restrained government.
Government spending was a buffer for economic activity during the downturn, but with ongoing gains in business activity, the coming years should see the government hand the reins of growth back to the private sector. Significant reductions in spending will come by late 2011, when infrastructure stimulus projects wrap up. Additional cuts to program spending should see compensation expenses drop on wage restraint, employment attrition and select job cuts.
On the other side of the scale, corporate Canada is doing much better. By any measure, the current recovery in capital spending is impressive. The rate of return on capital employed is back to its mid-2008 level, and despite the surge in investment, corporate Canada’s cash position is at a record high (in relation to both equity and sales). Large corporations can still raise funds relatively cheaply, and cash-starved small- and mid-sized firms can now borrow more easily, with overall credit outstanding to this sector starting to show signs of life after being in negative territory for the past two years.
In fact, the manufacturing sector is already positioned to start expanding — with its current capacity utilization reading of 81%, it stands above its long-term average and a record six points above that of the rest of the economy. The last time the utilization gap approached this level was in 1995, and manufacturing investment advanced by an average annual rate of more than 10% for the following three years. With relatively elevated capacity use and rates of return on capital employed in the manufacturing sector approaching a 10-year high, look for business investment in manufacturing to rise strongly in 2011, joining the upswing in western oil sands projects.
While current economic uncertainty will continue to influence markets and lead to sharp swings in commodity prices and related equities, the new mix clearly suggests that investors should focus on the improving the conditions of corporate Canada, in general, and the manufacturing sector, in particular. With supply-chain opportunities arising south of the border as a result of the U.S. manufacturing sector’s increased exposure to emerging markets, look for growing opportunities for high-end Canadian exporters in the coming years with positive implications for their valuations.
Another opportunity in this environment is the dividend-paying segment of the market. The recent increase in risk aversion will benefit this sector directly, as it tends to attract conservative money, and indirectly as increased uncertainty will limit any potential upward pressure on interest rates.
Benjamin Tal, Deputy Chief Economist, CIBC If you have any questions about credit, mortgages or interest rates contact me.
Friday, June 3, 2011
Key findings of the poll include:
39 per cent of respondents said they would choose a fixed mortgage if they had to choose between a fixed or variable mortgage today.
32 per cent said they would choose a variable rate mortgage.
One-quarter (25 per cent) were undecided as to which would be the better choice.
61 per cent of respondents believe interest rates will be higher a year from now, while 24 per cent believe that rates will remain the same over the next 12 months.
Only 3 per cent of respondents believe rates will be lower a year from now than they are today.
"The divergent opinions on whether to go fixed or variable underscores what our advisors see everyday in their meetings with clients - choosing the right mortgage depends on your personal financial situation, and there's no single answer for everyone," commented Colette Delaney, Senior Vice President, Mortgages, Lending & Insurance, CIBC Retail Markets.
While the poll revealed that Canadians believe rates are likely to increase in the next 12 months, Ms. Delaney advised homeowners to consider additional factors beyond interest rate predictions when making mortgage decisions. "You need to approach the fixed versus variable decision from the inside out, starting with your personal financial goals and working from there," added Ms. Delaney. "Your mortgage is a major part of your overall financial plan, and your decisions should be based on how your mortgage fits with your long term financial goals, not on short term rate fluctuations."
The poll results also highlight that views on choosing a fixed or variable mortgage can change depending on your stage of life. For example:
Among 25-34 year olds, who are more likely to be first time buyers or new homeowners, only 27 per cent would choose a variable mortgage
That climbs to 42 per cent among respondents 45-54 years of age, who are more likely to be near the end of their mortgage and have greater tolerance for rate changes within their mortgage payment
Ms. Delaney noted that homeowners can look at both a fixed and variable strategy over the life of their mortgage. "For most people, your mortgage is a long term proposition, so your strategy should look beyond your first term," commented Ms. Delaney. "You may choose to start with a fixed mortgage when you buy your first home, then transition to a variable mortgage in later terms when you have improved your financial situation and paid down some of the principal."
While homebuyers this Spring will need to make the fixed vs variable decision when they buy a new home, Ms. Delaney also encouraged existing mortgage holders to take a fresh look at their mortgage and evaluate their options to help reduce their balance faster.
CIBC has a mortgage offer for existing mortgage holders who may be in a closed mortgage with another financial institution and who want to consider switching their mortgage as part of their long term strategy to reduce the total interest they pay. The CIBC Mortgage Switch offer includes cash back up front to help mitigate the cost of moving a mortgage before it is up for renewal, and a competitive fixed or variable rate to help homeowners take advantage of today's low rates and pay down their mortgage sooner.
Each week, Harris/Decima interviews just over 1000 Canadians through teleVox, the company's national telephone omnibus survey. These data were gathered between April 28 and May 1, 2011. A sample of this size has a margin of error of 3.1%, 19 times out of 20. If you want to discuss this poll and which option is best for you , Contact me.
Wednesday, June 1, 2011
While most people are familiar with CMHC , Canada's largest mortgage default insurer, many are not aware that Genworth Financial, a private insurer is also active in Canada. In 2007, a third insurer entered the market in what could be called the boom times in the Canadian real estate market. While the firm did well, the failure of it's parent company, AIG Garanty in the USA, brought unwanted instability and ruined their name. MortgagebrokerNews , a online trade publication issued an article recently on the third insurer. Here it is in it's entirety. As per usual , if you have any questions contact me at Calgary Mortgage Broker.
Canada’s “third” mortgage default insurer is gearing up for a significant growth spur, the company readying to welcome a major lender to the fold at the same time it meets growth targets.
“We have achieved our year-to-date business projections, despite the relatively soft market,” Andy Charles, president and CEO of Canada Guaranty told MortgageBrokerNews.ca., pointing to January through May premium numbers that have seen the Canadian-owned company cement market share. The progress comes even as the growth of new originations slows for Central and Eastern Canada as well as key Western centres.
The return to a more stable spring market coincides with Canada Guaranty’s first-year anniversary, the company’s launch coming in April 2010 with the acquisition of AIG’s book in this country. The new company is the only 100-per cent Canadian-owned private mortgage insurer, with Ontario Teachers’ Pension Plan and National Guaranty Mortgage Holdings Inc. as principal shareholders. That ownership team inherited the market’s No. 2 private insurer with assets of $270 million and a total equity of more than $118 million. Market share at the time was pegged at one per cent to two per cent of Canadian volumes.
Charles is actively building on that position, with a strategy focused on winning large institutional lenders. It’s now paying off.
“Canada Guaranty anticipates the announcing a new major lender to the group in June,” he said, with details to follow over the next couple weeks. The addition of one of the country’s Big Six would strengthen the insurer’s hand as competitor Genworth Canada grapples with the slowing market.
While the leading residential mortgage insurer outside of CMHC realized $101 million on net premiums written during the first three months of 2011, that's $33 million lower than the previous quarter. It does, however, represent a year-over-year improvement of $7 million, according to the company’s Q1 financial statement.
Some analysts were expecting a surge in new policies resulting from a crush of homebuyers looking to get into the market ahead of tougher federal mortgage rules.
That wave of business failed to materialize.
“The government mortgage rule changes that took effect March 18, 2011 did not have a material impact on mortgage originations in the quarter,” according to the Genworth report. “We delivered solid net premiums written in a slower origination market,” added CEO Brian Hurley.
Canada Guaranty hasn’t yet released details about its own performance in the run-up to that mid-March deadline, although brokers and a CMHC official both point to an active period, reflecting an increased number of refinancing applications.
Building relationships with individual brokers as well as broker channel lenders has been a top priority for Canada Guaranty, Charles told MortgageBrokerNews.ca. A large part of that is a user-friendly model, offering broker tools such as AMP-accredited continuing education and a quarterly market report.
Tuesday, May 31, 2011
Why would tenants choose to Rent to Own, when it is cheaper to rent for a few years, save for down payment and then buy a house? In many cases it does cost less to rent an apartment or a house than it does to Rent to Own the same place. Even when you factor in the net rent payments each month (which is 80% of the total monthly payments, since 20% of their rent goes towards their accumulated down payment credits on average), renting probably costs less each month.
So, in reality we are only talking about those who want to enter our new purchase program. Our new purchase program is for tenants who want to buy a home that's listed on the Multiple Listing Service (MLS). Most of these tenants have saved between 5-10% down payment, have decent jobs but have credit challenges (which is what is preventing them from getting a mortgage).
One of the primary benefits for the tenant is for them to enter into the credit counseling program, which helps them re-build their credit every month in a very disciplined way. I know what some of you are thinking - why can't they do this on their own and still rent an apartment? This is a fair statement - which leads to my next point...
Rent to Own is a great forced savings program for tenants, with 20% (on average) of their monthly payments going towards their deposit. The reality is most of the tenants (and society in general I would say) have difficulty saving money, and this is a big motivator for the tenants. Home ownership is a very emotional decision. Even though it may cost more each month, when rent to own tenants see what is available on the real estate market, it's normal for them to get emotionally invested in their home. I see it every day. Tenants can't believe how much better their "rent to own" home is compared to where they used to live. Usually the homes are in much better neighborhoods and in better school districts. It's easy to see how making the jump into rent to own allows for a family to have a much more improved lifestyle. With that, I also believe we live in a society of instant gratification- everyone wants that shiny new car NOW, or beautiful big house NOW. So even though it may cost more to do our program, they get the home they want NOW. And in reality, when assessing the market rents compared to the tenant's effective rent payments, we are only talking about a 15% premium on average to live in a rent to own home. If they can have the better house, better neighourhood, better school and better lifestyle - isn't 15% more worth it? Our tenants think so. If you want to discuss this article or if you have questions about mortgages in Alberta , contact me
Wednesday, April 27, 2011
Today's Globe and Mail has an article on home buying. It cautions people to check to see if the renovations on the home you are hoping to buy are well done. The best way to gauge this is to put a home inspection into the offer to purchase. For $400 you can find out how much life is left in the furnace the roof shingles and how airtight the windows and doors are. It's never a waste of money. If something is halfway through it's lifespan you can plan to replace it in 5 years if you know that's how long it should last. Planning takes much of the risk out of a home purchase.
If you need more information on home buying, I have some videos and brochures from CMHC on renovating, buying and budgeting for a home. Contact me at my website and I'll send the info to you. Happy Spring house hunting. /
Thursday, April 14, 2011
We've all seen those movies where surfers frantically paddle their boards towards the shore in front of a desirable wave. Why? In order to take advantage of the full power of the wave they need to be ahead of it. The same is true about buying real estate. You want to be ahead of the wave. The problem is anticipating when the wave will arrive. CDC Consulting Inc. just put out an Economic Outlook forecast that includes a formula for anticipating the wave.
The Economic Formula to predict the future is as follows:
GDP growth >> Job growth >> Population growth >> Increased rental
demand (12 months later) >> Increased rents >> Property purchase demand
(18 months later) >> and eventually leads to property price increases.
Where is Alberta on this progression? Alberta Economy is set for solid growth in 2011: RBC
Reports 4.3% hike in GDP forecast for this year, TD projects 4.2% hike in GDP forecasts for this
year. The Conference Board of Canada states Alberta will lead the country in growth in 2011.
After being particularly impacted by the recession and late to the recovery, the Alberta economy
is once again hitting its stride. Owing to robust crude oil prices, an increase in drilling activity,
and a healthy inflow of inter-provincial and international migrants, Alberta is slated to be among
the provincial economic growth leaders in 2011 and 2012. As well, Calgary and Edmonton are
forecasted to lead the country in GDP growth for major cities for the next 3 years. Good growth
is 3%; however they are predicting a whopping 4.3% growth for Alberta. Alberta is leading the
country in employment gains, as 14,000 jobs were created in February.
But even more important is the projected number of construction jobs being created over the
next 8 years are expected to surpass 2007/2008 levels
This sounds like great news. I know that I have been getting more calls and email inquiries from first time home buyers who feel it is time to make the leap and buy a home. If you are interested in buying a home most realtors will not deal with you unless you have a preapproval from a lender or mortgage broker. If you have any questions or want to apply for a preapproval contact me .
Wednesday, March 30, 2011
I recently found the article below discussing variable vs. fixed rates. The article agrees with my point of view. First time home buyers need the security of a fixed rate while they get used to being home owners and the expenses that this entails. However, over time, a variable rate or an adjustable rate mortgage will save you money. In 95 of the past 100 years, the variable rate was the better choice.
Read below to find out more or check the rates out yourself at my website
The good news in the housing market these days isn’t just low interest rates.
Experts say that whether you choose a variable rate mortgage or a fixed rate for a set period of time, the difference over the long run is likely to be minimal.
“Rates have never been this low so Canadians are increasingly looking for advice when it comes to mortgages. The question of fixed versus variable takes on greater importance when you consider where rates are and the possibility that rates will start to increase towards the end of this year,” said Collette Delaney, senior vice-president of mortgages and lending at the Canadian Imperial Bank of Commerce.
Experts typically say that a fixed-rate might bring more peace of mind to first-time home owners, and that those who are further into their mortgage payments may like to try a variable rate to save some money.
But that may not be right for everyone.
“There is really no generic answer,” Delaney said. “What’s right for me may not be right for you or someone else because we’re all at different stages in terms of financial planning and lifestyle.”
The big advantage of fixed rate mortgages is that they offer a high level of stability. When you lock in a mortgage at a fixed rate, you’re locking in for the term of your mortgage so you will know, for each monthly mortgage payment, exactly how much is going to the interest and how much is going to the principal.
“You’ll know at the end of your term how much of your amortization you’ve paid off. The downside is that you can’t take advantage of lower interest rates. If rates do drop, you won’t have the ability to have more of your payment go towards the principle and less to interest,” said Bernice Dunsby, director of home equity financing at the Royal Bank of Canada.
With a variable rate mortgage, your monthly payments don’t change. What may fluctuate is your interest rate. That means when rates go down, an increased amount of your payment will actually go to your principal, and less to interest. That means when rates go down, you’re paying off your mortgage faster.
But when interest rates increase, so does the portion of your payment that goes to interest. With less going to cover the principal, it’s possible that your amortization period could be extended.
Research by Canadian economic experts shows that variable rate mortgages hold more benefits to consumers the vast majority of the time.
Moshe Milevsky, associate professor of finance at York University, studied mortgage rate data from 1950 to 2007 and found that choosing a variable rate mortgage would have saved Canadians $20,000 in interest payments over 15 years, based on a $100,000 mortgage.
He also found that Canadians would have been better off with a variable rate mortgage compared to a five-year fixed rate 89 per cent of the time.
The question is whether this other 11 per cent of the time when it is advantageous, is right now, said Benjamin Tal, senior economist with the CIBC World Markets.
“This is one of the few examples of times when it really doesn’t make much of a difference. If you take variable and I take fixed now and we meet five years from now, you would probably be able to buy me lunch, but it would be a cheap lunch.”
That’s largely because interest rates are so low right now. Economists are expecting rates to increase by about half a percentage point or more beginning in June, with further rate hikes to come in 2011.
Right now, variable rate mortgages tend to be about 1.75 percentage points cheaper than fixed rates. But interest rates will probably rise by more than that overall in the next couple of years.
“This will probably take variable rates, more or less to where fixed rates are now, maybe a bit higher. If you do the math, you would find the difference would not be very significant,” Tal said.
If you’re looking for peace of mind, he added, take the fixed rate.
“If you have a large mortgage vis-à-vis your income, I would go fixed and just relax about it. Learn the market, pay as much equity as possible but go fixed because you don’t want the volatility,” Tal said. “However, if you have been in the mortgage for a while and your mortgage is not as large relative to your income, pay with the variable and you will do better over five years from now but not significantly.”
Many banks have an array of mortgage products that combine the fixed and variable rates mortgages. These typically allow homeowners to combine the security of the fixed rates with the ability to take advantage of any interest rate declines.
But experts say that even if a variable rate mortgage could save you money in the long run, you still need to think about the risk.
“If a fluctuating interest rate is going to keep you up at night because you’re not sure how much is going to principle and interest, then maybe a variable rate mortgage is not right for you,” Dunsby said.
Wednesday, March 9, 2011
If you are looking for a bargain, expect to get less than you would get if you paid full price. I have heard of bank owned homes with the appliances, copper piping and light fixtures removed and sold by the previous homeowners.
Never was the term "Buyer beware" more appropriate than it is today in the US market.
If you are looking for a home purchase in Canada or you want to take advantage of low home prices to buy your vacation home in Arizona, you will need a 25% down payment. Call me and we can arrange to take the funds out of your Canadian home. All it takes is an application. Just click the APPLY ONLINE button.
If you want to keep up on the latest rates, sign up for my Rate Advisor. Every Thursday night you will receive up to date rates for fixed and variable rate mortgages.
Be sure to call me, Calgary mortgage broker extraordinaire, Dave Cooke
9 items homebuyers desire in 2011
Tuesday, March 8, 2011
If you have your eye on a property get an offer in now. Don't worry about having to take possession by the 18th. You still have time. If you have any questions contact me at 403-836-1201or visit my website at Mortgage Alliance
Wednesday, March 2, 2011
Today's newspaper had a story about Canadians cautiously paying down their debts. A month ago the Harper government and the Bank of Canada were expressing concern about Canadian debt reaching 148% of an individual's earnings. Some of this can be explained as mortgage debt. No one expects someone to pay off a house in a year. This is on-going and the value of the asset, in this case, the house will appreciate over time.
What today's report states is that while debt has gone up and savings dropped, homeowners have seen their net worth increase by 27% since 1999, while renters have seen their net worth drop.
Once again we see proof that owning a home is a wise investment.
Tuesday, March 1, 2011
One of my lenders, Street Capital, just issued a memo addressing some of the questions that people have been asking about the new rules coming into effect on March 18th. I thought that they handled the questions so well it bears repeating here on my blog.
Will the new refinancing rules allow a borrower with a mortgage above 85 per cent loan-to-value (LTV) to refinance by extending the amortization period?
No. Effective March 18, 2011, borrowers will not be permitted to refinance a mortgage above an 85% loan-to-value, unless the borrower has a binding refinance agreement dated prior to March 18, 2011.
I have a written mortgage pre-approval from a lender, dated before March 18, 2011 with a 35 year amortization. Will I still be eligible for a 35 year amortization if I don’t sign an agreement of purchase and sale until March 18 or later?
No, a mortgage pre-approval is not considered to be a “binding agreement”. You may have a 35 year amortization only if your agreement of purchase and sale is dated before March 18, 2011.
Will the new parameters apply to assignment (“switch” or transfer) of a previously-insured loan from one approved lender to another?
No. As long as the loan amount and amortization period are not increased, the new parameters will not apply to a switch/transfer/assignment of mortgage to a different approved lender.
If I sell my current home and buy another, will the new parameters apply if I transfer the outstanding balance of my CMHC-insured mortgage to the new home?
As long as the outstanding balance of the insured loan, the loan-to-value ratio and the remainder of the amortization period are not increased, the new parameters will not apply when the CMHC mortgage insurance is transferred from one home to another.
What if I need to increase the amount of my insured loan when I sell my current home and buy another?
In this situation the new parameters will apply for any insured loan.
Is it only new Home Equity Lines of Credit (HELOCs) that are affected by the new parameters or existing HELOCs as well?
As of April 18, 2011, CMHC will no longer offer mortgage loan insurance on non-amortizing lines of credit to approved lenders, such as HELOCs. However, if a HELOC is already CMHC insured then it remains insured for the life of the mortgage.
HELOCs will no longer be insurable as of April 18, 2011. Is there any situation which would quality for an exception (e.g. binding agreement) to allow for these loans to be insured?
Thursday, February 24, 2011
What you may not know is that you have already been stress tested at the time you took out your mortgage. Up until this time last year, all variable rate mortgage applicants were tested at the 3 year fixed posted rate. This rate is at least double the variable rate and often 2 1/2 times as great. Last year, Jim Flaherty changed that to the 5 year fixed posted rate. The present 5 year fixed rate is 5.44%. In order for you to get your present mortgage you had to qualify at this higher rate. Therefore you have been stress tested.
I should add though, that if you live in Vancouver or Victoria, the idea of having your monthly mortgage payment double is a scary thought and I have to wonder if you were councelled by your bank or broker as to the negative aspects of variable rate mortgages.
As a general rule, a person advising you on a mortgage should present the positive and the negative aspects of the product so that you can make an iformed choice. Unfortunately, many bankers and mortgage brokers offer you one choice which they have made. This is one reason that CAAMP, the Canadian Association of Acreditted Mortgage Professionals has introduced the AMP designation. Anyone with the AMP accreditation will work for you and not let their personal preferences get in the way. By the way, did you know that Joe or Jane at the bank has not taken a mortgage course and does not belong to your provincial mortgage association? They are bank employees and do not need to take any training or special courses. Scary isn't it?
The author is an accreditted mortgage professional with Mortgage Alliance in Calgary Alberta. Visit his webpage at http://mortgagealliance.ca/davidcooke
Wednesday, February 23, 2011
1. best rates – banks only offer you their best rates not their competitors. We have access to banks, mortgage companies, trust companies and private lenders. When a bank decides to increase its market share by offering extraordinarily low interest rates are exceptional terms a mortgage broker can offer you that. While banks can offer you their 5 or 6 different mortgages or HELOCS, I have access to 40 lenders and roughly 150 different mortgages and HELOCS>
2. customized products. – we carry products that banks can’t offer due to banking regulations ie: private lenders with interest only products, stated income products,one year open mortgages,New to Canada or even one for people who do not have employment.
3. customer service- as we rely so heavily on referrals we go above and beyond in our service, meeting clients at night, weekends, accompanying them to their branch to get their RRSP’s cashed. When a client comes to me with credit issues, I will work with that person to improve their credit and when they are credit worthy, I'll get them into their own home. When was the last time a bank offered to help you re-build your credit? Never!
If you want a savings account, a RRSP go to a bank. If you want a mortgage, go see a mortgage broker. You'll do much better with a broker.
Thursday, February 17, 2011
Anyone who wants to renovate will now have more equity in their homes to pull out in a line of credit to finance these projects. Lines of credit are a great way to finance projects or purchases using low interest loans.
Here is an overview of what CMHC had to say about Alberta's economy
The recovery of oil prices is providing a welcome boost to the Alberta economy. Provincial crown petroleum and natural gas rights were auctioned at record values in 2010, which will lead to higher drilling and energy exploration in 2011. Investment in oil sands projects will also continue to grow, accelerating economic growth in Alberta. The natural gas industry will continue to be impacted by a low price environment and its contribution to the economy will be muted until prices move higher.
In 2011, employment growth in Alberta will recover and exceed the peak level of employment reached prior to the economic downturn. Improved labour market conditions will move the unemployment rate lower and draw more people to Alberta.
The turnaround of interprovincial migration flows in 2010 should continue over the forecast period, as Alberta’s labour market attracts more migrants in 2011 and 2012. International migration will remain elevated over the forecast period. Total net migration to Alberta is projected at 31,450 in 2011, then rise to 34,100 in 2012. Overall, migration patterns are expected to support housing demand in Alberta.
Friday, February 11, 2011
The figures and charts he sees come across his desk tell the story, months before it hits the newspapers. What Tal is suggesting in today's National Post article is that rates for variable rate mortgages are about to go up and that it's time to lock into a fixed rate mortgage. Economists feel that there's a 75% chance that in May overnight bank rates, which determine the interest rate for VRM's will go up
Added to this , the posted fixed rates for a 5 year mortgage term went up on February 8th from 5.19% to 5.44%. If the fixed rate continues to go up then the switch to fixed rates will wipe out any benefit you gained from being in a VRM. As Tal says, |the window is closing"
If you want to discuss whether it's time for you to make the switch call me at 403-836-1201.
Tuesday, January 25, 2011
Today in broker news, we were told that a recent poll by TD Canada Trust found that 89 per cent said being able to make additional lump sum payments or weekly or bi-weekly payments was important to them.
In addition, the survey also revealed that 75 per cent of Canadians would like the ability to defer or reduce their monthly mortgage payment in the case of an unexpected event or shortfall. As well, 60 per cent would be more likely to make a lump sum payment to pay off their mortgage faster if that gave them the flexibility to pay less at a later date if something unexpected came up.
This afternoon, TD Canada Trust announced that they would add a flexibility feature to their mortgages to make them more attractive to clients.
Why are they do this? Recently, TD Canada Trust decided to change the charge on title for their mortgages from a regular mortgage charge to a collateral charge. They are now registering a charge for up to 125% of the value of your home to allow for future lines of credit when the house value goes up. Unfortunately, this means it's very difficult to get out of a TD mortgage if you decide you want to refinance, low size or anything else before the end of your term. Every mortgage broker I know has stopped sending mortgages to TD as a result.
If they think that this will help to increase their business they are wrong.
Most lenders offer the opportunity to change from monthly to bi-weekly payments. Most will also allow a "miss a payment" option as well. Frankly I don't see TD offering the consumer anything they do not already have available to them from a variety of lenders.
As to the pre-payment privileges, offering 20% pre-payment is a waste for most consumers. With housing prices in the $400K range, the maximum that I have seen people using is 5% and this is a privilege that people pay for !.
As a matter of a fact, I have one lender who will lower the interest rate if you want a lower pre-payment privilege. Who great is that?
Contact me if you want more information at my website or call me at 403-836-1201.
Thursday, January 20, 2011
The new rules will not have much of an effect and will actually make it harder for some people to lower their personal debt, which is the reason given for the rule change. When people refinance their homes they use the money in most cases to either pay for renovations which add to the home's value or they use the money to pay off high interest debts. With interest rates below 5%, it is easier to pay off principal and lower your debts faster than credit card debt at 24%.
The Toronto article can be found here. Time will tell as to whether these changes improve Canadians debt loads or not.