Many homeowners are locking in to historic low mortgage rates. A longer term mortgage offers the security of knowing exactly what your mortgage rate will be for the term chosen, which means that whatever happens to the mortgage rate environment, you can plan your payments until the end of the term. Typically, the majority of those who lock in to a fixed-rate mortgage choose a five-year term, although some are now taking a look at the security of longer terms mortgage rates.

With today’s opportunity to lock in historic low mortgage rates that are among the lowest in history, some homeowners who locked into a very good mortgage rate a few years ago are even willing to pay an interest penalty to lock into a new mortgage at today’s rates. We can do a review of your situation to see if you can benefit. Other homeowners are putting this historic low mortgage rate opportunity to use for other money-saving reasons, which include:

• Consolidating more than $25,000 in high-interest loans or credit cards and rolling those bills into a lower-rate mortgage to boost monthly cash flow, have one monthly payment and save on interest costs
• Taking equity out for a renovation or home repair project, an investment opportunity, or a large looming expense – tuition, wedding, or dream vacation

If you are wondering whether it is time to lock in your variable rate mortgage, contact us for a review of your situation, especially if it has been over a year since your last mortgage review. We can help you make sure your mortgage continues to meet your needs.

The right mortgage, of course, depends on many factors: including your personal financial situation, goals and risk tolerance. That’s why it’s a great time to talk. We are always aware of the current environment and the resulting implications, so we can help you find a mortgage that gives you an edge and meets your current needs and future goals. In fact there are many reasons to contact us today: if you’re a first-time buyer or trading up, looking to manage your debt or manage a new business, whether you need a renewal, a refinance, or a renovation, and even in tough situations – divorce, job loss, or bad credit – we’ll help you use today’s great rates to get you where you’re going.

It seems like more lenders are using collateral charge mortgages these days so it’s important to understand the key differences between a collateral and standard charge mortgage.

Which is better for you? They both have advantages and disadvantages, so it all depends on your preferences and future needs. It’s important to understand those differences so you can make sure you get the mortgage that best fits your long-term goals.

Standard Mortgage Charge:

• Ideal if you won’t need to refinance your mortgage during your mortgage term
• Ideal if you want to have the ability to easily and cost effectively move from lender to lender at renewal
• Offered by majority of lenders. Some offer both – standard charge mortgages and HELOCs that are a collateral charge. You choose the option that best meets your needs
• If need to borrow more, you have the option of a second mortgage or line of credit
• You are not as tied to your lender for your full amortization period; it’s easier to switch lenders at renewal with little or no cost; keeps your options open

Collateral Charge Mortgages:

• Ideal if you want to be able to access your equity for debt consolidation, renovations or to invest in property or investments easily and cost effectively i.e. no legal fees (rate may be higher than original, need to qualify)
• Only option available at ING, TD, and home equity lines of credit (HELOC)
• Your mortgage is registered for the same or more than the property value; 100% at ING, 125% with TD Bank, which is why you can access your equity
• May affect your negotiating ability with your lender at renewal. It is harder to switch lenders without getting a new mortgage and paying legal fees, which range from $500 to $1,000
• Could be difficult to get a second mortgage unless your home significantly appreciates in value

Whether you’re buying your first or next home, getting ready for renewal, taking out some equity for debt consolidation, renovations, or investing, let us help you get the right mortgage type (Collateral or Standard Charge) with the rate and features matched to your needs now and in the future.

Make More Payments

Your first option is to pay more frequently, such as accelerated bi-weekly. Most mortgages default to a monthly payment plan. However, by changing to accelerated payments you will effectively make more payments throughout the year and therefore lower interest costs.

For example, if your monthly mortgage payment is $1,000 [12 x $1000 = $12,000/year] you can choose to pay on an accelerated payment plan option every two weeks $500, since there are 52 weeks in a year you will end up making 26 payments, which is one additional monthly payment each year [26 x $500 = $13,000].

Round Up Your Mortgage Payments

Every little bit counts when it comes to increasing your mortgage payment. The more you can pay, the faster you will pay off your mortgage.

Round your mortgage payment to the next $25 or $50 or even $100 increment. For instance if your accelerated bi-weekly payment is $413 round it to $425, $450 or $500. Make sure you budget accordingly, but chances are you won’t miss the $10-90 over a couple weeks time and you will be paying down your mortgage faster.

Make Lump Sum Payments

Whenever possible, take any unexpected lump sums of money and apply it to your mortgage. Since its usually money you were not expecting it likely won’t affect your lifestyle.

Overall this strategy can take years off the life of a mortgage. Especially in the early years. So the sooner you start the better.

Keep Your Payment The Same When Interest Rates Drop

If you have a fixed rate mortgage and interest rates have decreased, when it is time to renew your mortgage consider keeping your payments the same; since less money will go towards paying interest, more will go to paying down the principal.

If you have a variable rate mortgage, and interest rates drop the same thinking applies; keep your payments the same so that more of your payment goes toward paying down the principal of your mortgage.

Increase Your Payments When Interest Rates Increase

If interest rates increase, increase how much you pay each mortgage. This is a must for people in a variable rate mortgage so that you continue to payoff principal. If you don’t, less money will go towards paying down the principal and more towards paying interest-prolonging the time it takes you to pay off your mortgage.

Choose A Shorter Amortization Period

Look to reduce your amortization period. The shorter the period chosen the less interest you will pay. Although your mortgage payments will be higher, you will pay less interest over the course of the mortgage. Re-evaluate the amortization at each time you negotiate another mortgage term.

Consider Refinancing

Today’s interest rates are at historic lows and if you are concerned about the possibility that rates will increase, refinancing your current mortgage may help you save money in the long run.

Generally, homeowners should consider refinancing when:
•Rates are low and the penalty for breaking your mortgage does not exceed the savings available by switching.

•There are additional savings available above and beyond just a lower interest rate. For example, does your current mortgage offer you the flexibility to make lump sum payments, increase your payments or change your amortization period without penalty? If these are features you want but don’t currently have without incurring a penalty then you will want to factor this into your refinancing decision as well.

•You have other, high interest debts (like credit cards), that by consolidating into your mortgage will save you money.

Make The Largest Down Payment You Can

Obviously the more money you put down on your home mortgage the less interest you will have to pay back. Its important to budget when buying a new home and know how much money you should set aside for closing costs and how much you should put towards the down payment.

Use one or a combination of these ideas to pay off your mortgage faster!

Canada’s housing boom is among the most long-lived in the Western world at 13 years, the average house increase in value by 85 per cent since 1998!

Low interest rates, without an end in sight, brought many into the housing market and also made others upgrade homes.

Looking into 2012 the world will continue to watch the European Debt Crisis and also the state of the economy in the United States.

The Bank of Canada has their meeting schedule in place, meeting are as follows…

• January 17, 2012
• March 8, 2012
• April 17, 2012
• June 5, 2012
• July 17, 2012
• September 5, 2012
• October 23, 2012
• December 4, 2012

Economists are not expecting any changes to the Bank of Canada rate into 2013–good for those in discounted Variable Mortgages. We will have to see how 2012 plays out.

Keep checking back often as we continue to comment on the mortgage market in 2012!

• In particular, Canadians largely agree with the proposition that “as a whole, Canadians have too much debt”.
• On the other hand, among Canadians who have mortgages, few agree that they “regret taking on the size of mortgage I did”. In addition, there is substantial agreement that mortgages are “good debt”.
• These answers portray opinions that “other people” have taken on too much debt, but as individuals most are comfortable with the debts that they have taken on. The gap between these perspectives is intriguing.

CAAMP’s previous research on mortgage indebtedness has found that Canadians –both borrowers and lenders – have been prudent with regard to mortgages. It might be that the fearful opinions about overall debt have been influenced by statements in the media, moreso than by the actual behaviour of Canadians.

Another set of contrasting results is also interesting:

• A high percentage of Canadians agree with the proposition that “low interest rates have meant that a lot of Canadians became homeowners over the past few years who should probably not be homeowners”.
• But, even more of us agree that “real estate in Canada is a good long-term investment”. In addition, there is widespread agreement that “I/my family would be well-positioned to weather a potential downturn in home prices”

Again, the author saws some inconsistency, and wonders whether statements in the media have influenced many Canadians to believe that other people (“but not me”) have been irresponsible.

What are your thoughts?

Please leave us a comment.

Foreclosure Fraud

First, let’s discuss Foreclosure. Foreclosure is the process whereby the mortgage lender takes possession of a borrower’s home and sells the home to cover the mortgage debt and associated expenses related to the borrowers account which they have been unable to keep current.

When this situation happens a criminal will take advantage and offer the borrower a loan to cover the debt and expenses and consolidate the loans in exchange for up-front fees and an agreement to transfer the property title over to them.

The criminal will then keep all the payments made by the owner and ignore repaying any of the outstanding debts. They could also sell the house, refinance the house and leave with the proceeds.

In the end the homeowner is left still in debt, and likely in more debt, and will loose the home.
Steps to protect yourself include protecting your identity, contacting your lender if you are having problems making mortgage payments, seek legal advice before accepting someone’s assistance in settling your debt obligations.

There are two types of Real Estate Fraud: Title Fraud and Foreclosure Fraud.

Title Fraud

When you purchase a new home, you buy title to the property. In turn your lawyer who completes the transaction will register you as the owner of the property in the appropriate provincial land registry system.

Title Fraud begins with identity theft. Some of the common ways fraudsters steal your information is mail box theft, garbage sifting, computer hacking and phishing.

Once your identity is stolen the thieves use your identity to assume the title of the property and either sell the home or get a new mortgage. The thieves could discharge your current mortgage, transfer the title, secure a new larger mortgage and put the home in their name.

Since most real estate fraud involves identity theft its important to protect yourself from being a target

Once the mortgage funds are given, the criminals can leave with the money. You as the rightful owner are not usually aware that this has taken place until long after the crime has been committed. You usually find out when the new mortgage lender contacts you looking for payments or someone knocks on the door claiming they own the house.

Criminals typically target homes that no longer have a mortgage, so they can maximize the amount of money they are able to steal or if you rent some or all of your house, which can allow the renter to gain greater information about your property.

Since most real estate fraud involves identity theft its important to protect yourself from being a target. Regularly checking your credit bureau and ensuring you have title insurance.

In Canada household expenditures and business investing remain strong, however the strength of the Canadian Dollar is concerning for our export business. Also underwatch is our growing unemployment numbers.

Credit rating agency Standards & Poors put 15 European nations on “credit watch with negaive implications”, meaning there is a 50% chance they will have their ratings cut.

The next meeting for the Bank of Canada is scheduled for January 17, 2012.

Many Canadians work hard to save their money. Most Canadians save through RRSP investment products as there are income tax advantages to doing so. The benefit to the program is that you don’t have to include the RRSP withdrawals in your income, and your RRSP issuer will not withhold any taxes on the funds you withdraw.

You can choose to withdraw a single amount or make a series of withdrawals throughout the same calendar year, provided the total of your withdrawals is not more than $25,000.

If you are buying a home with your spouse or common-law partner, each of you can withdraw up to $25,000, for a total of $50,000.

The RRSP money you withdraw must have been in your RRSP’s for at least 90 days in order to be withdrawn tax free.

Generally, you will have to repay all the withdrawn money back into your RRSPs within a period of no more than 15 years. You will have to repay an equal amount to your RRSPs each year until your HBP balance is zero. If you do not repay the minimum amount required for any given year, it will have to be included in your income for that year.

If you are considering buying your first home this is an excellent way to get started. The RRSP money can be used for any purpose so long as you are buying a home. For instance you can use the money to help pay for your closing costs, moving expense, or making some renovations to the home.

What should you do?

One option to consider would be the Purchase Plus Improvements Program (PPIP) offered by Genworth one of Canada’s Mortgage Insurers. The program allows for home improvements to be financed with your new mortgage with as little as 5% down payment (Mortgage Insurance Premiums will apply to the total mortgage amount).

This program allows the homebuyer to complete the necessary renovations and have the associated costs rolled into the mortgage; taking advantage of the lower interest rate mortgages offer when compared to unsecured lines of credit or credit cards.

The program covers the sale price of the home plus any renovations that would increase the value of the property, such as a new bathroom , kitchen, roof, windows. Renovations cannot be soley cosmetic in nature.

If you intend to use this program it is wise to make your Offer to Purchase include a clause conditional on getting the approval to complete the renovation you desire.

Next you would obtain quotes from a contractor to determine costs. Once approved, you can begin the renovation. Once the renovation is complete an inspector with confirm all improvements have been completed and send his report to the lender who will then release the funds to you.