Thursday, February 24, 2011

Survey- Canadians worried about rising interest rates

A new survey says that 20% of Canadians with variable rate mortgages are worried that if interest rates rise they are not sure that they will be able to afford the monthly payments. BMO has suggested that you try the stress test to see. Pick a higher interest rate, figure out the monthly payments and see if it works with your budget. Why are they suggesting this? No one knows how to figure out monthly payments so you will go into a branch and they have an opporuntity to get you as a customer.
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
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Wednesday, February 23, 2011

Choosing a mortgage broker over a bank

Why should you use a mortgage broker instead of a bank. It brings it all down to 3 points

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.

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Thursday, February 17, 2011

CMHC Outlook for Q1 of 2011

CMHC issued their housing outlook for 2011 for the first quarter. They expect housing prices to stabilize and then rise slightly this year. This is good news for anyone who has a property they bought at the peak of the housing boom as prices return to what they were at the time of their purchases.
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.
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Friday, February 11, 2011

Leading economist- time to lock in your mortgage rate

Benjamin Tal, chief economist at CIBC , says that the days of ultra low interest rates are coming to an end. If you have ever heard Tal speak he's usually right on the money when he predicts rate hikes and drops. It is often the first question he is asked at presentations. He is a cautious man, as many economists are. For Tal to come out and say, the good times are going to end, is like having him stand on top of the CN Tower with a megaphone to make an announcement.
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.