When Double Dipping is Okay

When double dipping is okay

Perhaps you remember the Seinfeld episode where George Costanza catches someone double dipping in the salsa. While this is considered unsanitary and bad manners some forms of double dipping are okay.

  Sometimes 2 levels of government want you to do something so they offer you an incentive. The idea is that over time people’s behavior over time changes and it becomes the norm to do this.

Several years ago when I was having my furnace cleaned and serviced the service man told me that the firebox had rusted and fumes could flow through my home. He turned the furnace off and told me that I needed a new one.

    At the time, the local natural gas company was offering discounts of furnaces for people who switched over to their company. The local electricity provider offered lower rates to people who bought a heat pump and the federal government had a program to encourage people to become more energy efficient. As  a result I was able to triple dip – I got a discounted more energy efficient furnace with air conditioning and a new lower rate for electricity.

    That program is gone now but there are others that you can benefit from. At this time Alberta residents are being bombarded with ads and flyers from window companies. They say that if you replace your windows now you can qualify for a $1500 rebate through the provincial government. What they are not telling you is that you can double dip. If you get an energy audit before the windows are replaced and you apply to your mortgage default insurance company , whether it’s CMHC, Genworth , or Canada Guaranty you may qualify for a 15% rebate on your premium !  On a $400,000 mortgage with 5% down you pay $16,000 in fees. How nice would it be to get $2400 back?

     The programs vary from province to province and cover windows, hot water tanks, appliances. You can check out what’s available here or ask your local mortgage broker for more information. .  Go ahead and double dip.Here's a link to help you find out what's available in your province.

 http://oee.nrcan.gc.ca/energy/products/energystar/why-buy/programs.cfm?attr=0

The U.S. Fed Finally Did It - Hiked Rates

Dr. Sherry Cooper, chief economist at Dominion Lending Centres published this article today.

For the first time in nine years, the U.S. Federal Reserve hiked their key policy rate--the overnight federal funds rate--by one-quarter percentage point (25 basis points) to a range of 1/4 to 1/2 percent. The policy-making Federal Open Market Committee (FOMC) said that the stance of monetary policy remains accommodative, thereby supporting further improvement in the labor market and a return to 2 percent inflation. The U.S. labor market has improved considerably this year taking the unemployment rate down to 5%, while inflation has been depressed by falling commodity prices and the strength in the U.S. dollar. Importantly, the Fed suggests that they expect economic conditions to warrant only gradual increases in the federal funds rate and that the funds rate will remain below levels that are expected to prevail in the longer run for some time. Having said this, the Committee's interest rate forecasts signaled four quarter-point increases in 2016, a stance that has been interpreted by the markets as relatively hawkish. This, of course, will be data dependent, and many economists expect fewer than four rate hikes next year. The Canadian dollar, which has weakened sharply in recent weeks on further declines in oil prices, edged downward with the release of the Fed decision, but bounced back shortly thereafter. U.S. Treasuries tumbled on the news pushing market rates higher. U.S. stocks, on the other hand, extended today's gains and the yield on two-year Treasury notes topped 1 percent for the first time in five years after the Fed ended seven years of near-zero interest rates and reaffirmed gradual tightening over the next year. The yield on the ten-year Treasury bond edged up slightly to 2.29 percent. Bank of Canada Will Remain On the Sidelines The Canadian economy has been hard hit by the continuing decline in oil prices and other commodity prices. Not only has West Texas Intermediate crude oil, the price received in the U.S., fallen to roughly $36 a barrel, but the price received in Canada for heavy oil is substantially lower. Economists expect that Governor Poloz will keep his benchmark overnight rate at 0.5 percent unchanged until at least 2017. Nevertheless, mortgage rates in Canada have likely bottomed as five-year market rates, to which mortgage rates are linked, are edging higher and lenders are pressured by very narrow interest rate spreads.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Own Sweet Home - Episode 5: An offer, a closing and place to call your own

Own Sweet Home - Episode 1: Meet the couple and their team of professionals

Part 2 in the series about buying a home

Troubling news on mortgage rates

As a consumer you have to be aware of changes that are occurring in the mortgage market. It's tough to stay on top of things which is why you really need to consult a mortgage broker now. Float downs are not automatic anymore.
 Contact me at http://davidcooke.ca for more information

Locksmith Scam Rips Off Home and Auto Owners

Hundreds, maybe thousands, of locksmith scam artists are taking advantage of emergencies to rip off home and auto owners across the United States. Some professional locksmiths even believe the widespread fraud is part of an organized crime operation.

According to the Consumer Federation of America (CFA), which published its annual Top 10 list of consumer complaints this past August, locksmith fraud is one of the fastest growing scams in the nation.

The basic structure of a locksmith scam is simple.

You're locked out of your car or your home or you urgently need to change the locks on your property for any of a number of reasons -- like securing it against previous occupants, or even a divorced spouse.

You look up a listing online or in the phone book and call up the supposed locksmith who subsequently grossly overcharges you for the service. $1,500 or so is not uncommon for a service that generally should cost around $150.

"Often unlicensed locksmiths use the Internet to advertise very low prices," says the CFA. "Typically, they disassemble the locks and then demand more than the amount they originally quoted to finish the jobs. Faced with the alarming prospect of not having working locks, consumers are forced to capitulate."

If the victim refuses to pay, the phony locksmith will often use bullying tactics, threaten to call the police, or refuse to return a credit card that the customer may have handed over at the outset.

Sometimes, too, bogus locksmiths can damage your property in the process of doing a botched job, costing even more to put it right. While this is an American problem it has spread to Canada as well

.  

I spoke to a locksmith recently and found out how you can spot a bogus locksmith.

1. look up the company. If they advertise on Kijiji but do not have a legitimate website, they are probably a fly by night operation. They also need to have a registered address as their place of business.

2. Look at their trucks. If they are unmarked this means trouble.

3. look up the telephone number. If it’s a cellphone or not registered anywhere this can be a red flag.

4 Ask to see their provincial license. As their occupation is breaking into homes and cars, believe me,

   The province wants to know who they are and that they are honest people. They should have a licence on their person and in their vehicle.

5. Ask how much the job should cost.

In this day and age, it’s easy to get ripped off. Take precautions and stay safe. 

for more information on homes and financing, contact David  at http://davidcooke.ca 

Breaking a closed mortgage can be Costly

A recent article in the Toronto Star highlighted a little known secret that the banks don’t want you to notice when you sign the paperwork on a mortgage. If you take a 5 year term and need to end the mortgage early whether it’s because of illness , divorce , a job transfer or any other possible reason, if you are less than half way through the term, a condition called Interest Rate Differential kicks in rather than the 3 months interest option.

    In the Star article, a RBC mortgage holder found he could not afford his home and he wanted to sell the home and get out of the mortgage. He was hit with a $13,000 penalty when money was already stretched to the limit. On one of the last pages of a mortgage commitment it often states how the IRD is calculated. When you get your mortgage at a discounted rate, there’s a posted rate shown at the bank. This rate is often 1 1/2%  higher than the rate you received. While you feel great receiving this rate, it can come back to bite you in the butt.

       IRD;s are calculated based on the difference between the posted rate and your rate multiplied by the number of months remaining in the mortgage term. The highest IRD I have heard of a client paying was $90,000.

           A good mortgage broker will ask you if there’s any chance you will have to end the mortgage before the end of the term.  If there’s a possibility we take you to a mortgage company or a trust company rather than a bank. These lenders do not calculate the IRD based on a posted rate as they do not have one. They often will just charge the 3 month interest penalty and leave it at that.

      This is one more reason why you should see a mortgage broker for your home financing needs rather than going to a big bank

Contact me if you need more information on this topic.  David Cooke, your Calgary mortgage broker. The Toronto Star article

How would you like 10% of your CMHC fees back?

Taxes keep going up, the cost of gasoline is going up. How are you going to get ahead these days? You need to find rebates, deals and money back offers. Here's one from CMHC. If you can make your home more energy efficient or if you buy a home that is already Ener Guide rated at 82 or above you qualify for a rebate of up to 10% of your CMHC fees. Take a look at your mortgage documents and you may have paid $11-12,000 in fees when you bought your home. You could get $1100 to $1200 back just for proving your home meets the energy efficiency ratings. 
   Now here's the item your realtor or bank do not tell you. If you make your home for energy efficient 4 years after your purchase, you can still apply for the rebate. How sweet is that?
 This rebate is also available through the private mortgage insurers, Genworth and Canada Guaranty  .  You do have to prove that you have improved the energy efficiency and you need to do this with an energy audit. A full explanation is available from CMHC and I have added the link to the bottom of this article. If you need more information contact me, David Cooke, your Calgary mortgage broker.



CMHC fee rebate explained  

Purchase Plus Improvements explained

   

So you found the perfect house in your price range, close to schools, and shopping but the kitchen is from 1956. Your down payment will clean out your bank account and you won't be able to afford to renovate for at least a few years. How about a program where you could have the renovations done soon after possession date? Would that interest you? Here's a great video that explains the process. Contact me if you have any questions.

Beware the pitfalls of collateral mortgages

Back in 2011, TD came out with collateral charge mortgages. The other banks soon followed suit. They found out that 80% of clients would stay with them regardless of the rate when they found out that it would be expensive to move their mortgage. Here's an article written at the time about the pitfalls of collateral mortgages. It still rings true today.

Many banks are now asking borrowers to sign collateral mortgages, but you could end up tied to this bank for life.

By: Mark Weisleder Published on Sat Jul 30 2011

When you apply for a mortgage, you usually just ask about the term, amount, interest rate and monthly payment. Not many people understand the difference between a conventional mortgage and a collateral mortgage. Yet many banks are now asking borrowers to sign collateral mortgages — and it could result in them being tied to this bank, for life.

With a normal conventional mortgage you bargain for a set amount, rate and amortization. Say the property is worth $250,000 — you bargain for a $200,000 loan, at 3.5 per cent, a five-year term/25-year amortization, payments of $998.54 per month.

A conventional mortgage is registered against the property for $200,000. If all the payments are made on time, the mortgage is renewed on the same terms every five years and no prepayments are made, the balance is zero after 25 years.

Should another lender decide to lend you money as a second mortgage, there is nothing stopping them from doing so, subject to their own guidelines. Under normal circumstances the principal balance on a conventional mortgage goes only one way, down. In addition, banks will accept “transfers” of conventional mortgages from other banks, at little or no cost to the consumer.

A collateral mortgage has as its primary security a promissory note or loan agreement and as “backup,” a collateral security, being a mortgage against your property. The difference is that, in most cases, the mortgage will be for 125 per cent of the value of the property. In our example, the mortgage registered will be for $312,500. But you will only receive $200,000. The loan agreement will indicate the actual amount of the loan, interest rate and monthly payments.

The collateral mortgage may indicate an interest rate of prime plus 5-10 per cent. This will permit you to go back to this same bank and borrow more money from time to time, without having to register new security. The lender will offer you a closing service, to register the mortgage against your property, at fees that will be cheaper than what a lawyer would charge you. Sounds good so far, doesn’t it?

However, this collateral loan agreement has different consequences, which are usually not explained to the borrower.

 • Most banks will not accept “transfers” of collateral mortgages from other banks, so the consumer is forced to pay discharge fees to get out of one mortgage and additional fees to register a new mortgage if they move to a new lender. Thus the bank is able to tie you to them for all your lending needs indefinitely because it will cost you too much to move.

 • Lenders may be able to use the collateral mortgage to offset any other unpaid debts you have. Offset is a right under Canadian law that says a lender may be able to seize equity you have in your home, over and above the mortgage balance, to pay, for example, a credit-card balance, a car loan, or any loan you may have co-signed that is in default with the same lender. In essence any loans you may have with that lender may be secured by the collateral mortgage. Nobody goes into a mortgage thinking about default, but “stuff” happens in people’s lives and 25 years is a long time.

 • Let’s say your house value is $200,000. A collateral first mortgage registered on the property is $250,000. The amount owing on the mortgage is $150,000. If you were to need an additional $20,000, but the lender declines to lend it for any reason, then practically speaking you won’t be able to approach any other lender. They will not go behind a $250,000 mortgage. Your only way out would be to pay any prepayment penalty to get out of the first mortgage and pay any additional costs to get a new mortgage.

 • Let’s say your mortgage is in good standing but you default under a credit line with the same bank. The bank could in most cases still start default proceedings under your mortgage, meaning you could lose the house.

 • Some lenders are offering collateral mortgages in a “negative option billing” manner. Unless you are informed enough to say you want a conventional mortgage, you will be asked to sign documents for a collateral mortgage.

One bank is only offering collateral mortgages.

I spoke with David O’Gorman, the president and principal mortgage broker with MortgageLand Inc. He tells me it is his duty under the law to ensure the “suitability” of any mortgage he arranges for a consumer.

He would be hard pressed to justify the recommendation of this type of collateral first mortgage to any consumer, without disclosing both verbally and in writing the points listed above, and he believes the consumer should have their own lawyer review everything before they sign.

Mark Weisleder is a lawyer, author and speaker to the real estate industry. Email mark at mark@markweisleder.com

When the banks say "gotcha"

Recently we have all seen the 5 year fixed rate of 2.99% being advertised by BMO. The promotion ends today. They are offering a rate that former finance minister Flaherty would not allow when he was in office. It sounds like a great deal but is it? Did you know that the only way out of this mortgage is by selling your house? The only other way is to pay all the interest due until the mortgage expires. Did you know that the pre-payment privileges that we take for granted are cut in half? What may look like a great deal can be one of the times when you know someone at the bank is saying "gotcha". This is one reason why it is so important to consult a mortgage professional rather than trying to go it alone.
You want some of these record low rates on the market but you’re locked into a mortgage. Just break it, right?
Not so fast, there’s a key question you need to ask before you commit to break a mortgage: how much will it cost you? Actually, it’s a question you should be asking before you sign up in the first place.
Don Hurman, a 64-year-old from Okotoks, Alta., learned the hard way when he incurred a $10,000 penalty after selling his house halfway through a five-year mortgage term. Some mortgages let you port the loan to a new home but Mr. Hurman was forced to break his and pay what is called the interest rate differential.
Here's an article that delves more into this problem. 
http://business.financialpost.com/2014/04/12/be-careful-before-you-break-that-mortgage/

Bank of Canada Rate Announcement

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  Good morning
  
  As you know, your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate and here is your personal update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.
  
  At 10:00 am EST, Wednesday January 22nd, 2014 the Bank of Canada again did what we expected them to do … they continued to maintain their overnight rate. What this means to you is that once again the prime rate on your mortgage, line of credit or student loan will not change and remains at 3.00%. This is fabulous news but don’t forget to make the most of the low payments you still have, as the rate will increase in the future. If you haven’t done so already, give me a call and we can chat about helping you get set up with a great GIC, Tax Free Savings Account, or Retirement Savings Plan as your payments continue to remain low. So did you, or someone you know, blow their budget over the holiday season and have started to get those dreaded credit card bills in and the reality is starting to sink in... let me help you get back on track with a review of your financial situation which might be a savings plan, credit counseling or debt consolidation to pay off high interest loans or credit cards. If you would like to chat about some budgeting and saving strategies – let me know as I would be happy to assist.
  
  Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision today:
  
  “Inflation in Canada has moved further below the 2% target, owing largely to significant excess supply in the economy and heightened competition in the retail sector. Global growth is expected to strengthen over the next two years with the US leading this acceleration, aided by diminishing fiscal drag, accommodative monetary policy and stronger household balance sheets. The improving U.S. outlook is affecting global bond, equity, and currency markets. Growth in other regions is evolving largely as projected. In Canada, growth improved in the second half of 2013. However, there have been few signs of the anticipated re-balancing towards exports and business investment. Stronger U.S. demand, as well as the recent depreciation of the Canadian dollar, should help to boost exports and, in turn, business confidence and investment”.
  
  Based on this news, the Bank still does not expect to increase their rate in the foreseeable future with any change most likely to occur late 2014 or even not until 2015! Remember, that any increase to the prime rate since 1992 has only been by 0.25% at any ONE time, so you won’t see a large significant increase all at once.
  
  Fixed rates dropped just slightly since the last announcement to around 3.39% to 3.59% for a five year fixed term.
  
  Based on this recent announcement, and the anticipation that the prime rate will still remain low for a while now, unless you feel otherwise, I’d recommend that you remain with your current variable rate product as the interest is lower than a fixed term rate right now. However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you. The next announcement on any change to the prime rate is March 5th, 2014 at which time
  I wonder if I can ask a favour – this is a great time for first time home buyers who are thinking of purchasing in the Spring to start with a pre-approval plan now to get them on track and save unnecessary interest. Also if you hear a friend or family member talk about going thru a financially tough time – maybe I can help with some budgeting and debt consolidation options for them. In either of these cases, would you mind passing my contact information on to them – this is very much appreciated.
• David Cooke - your Calgary mortgage broker