An interesting article was published in the Globe & Mail last week regarding mortgage prepayment penalties and the onerous nature in which the Big Banks calculate theirs.
Statistically, 65% of mortgages will be broken and borrowers will pay a penalty before the five year term is up.
Many people think that the differences in how lenders calculate fixed-rate mortgage penalties are all the same. This is simply not the case.
In the current rate environment, when fixed rates are more favourable for borrowers than variable rate mortgages, it’s important to know that being with a chartered bank may potentially cost you a lot more in the end.
I don’t believe that the vast majority of Canadian mortgage borrowers have any idea that there are significant differences in the way fixed-rate mortgage penalties are calculated, and the largest Canadian lenders, have been in no hurry to explain it to them.
A few reasons mortgages are broken early;
As with entering just about anything in life understanding where the exits are and just what is involved in getting through them is often the most important part of the process.
A conscientious and well informed independent mortgage planner should be able to explain how penalties are charged by any lender they are recommending.
The First Time Home Buyers Incentive officially came into effect last week and will start providing interest-free shared-equity loans to interested buyers in the form of down payment assistance.
To recap how the program works, participants must put down at least 5% of the home’s value with their own money, while the government (through the Canada Mortgage and Housing Corporation) would contribute an additional 5% of the down payment if the purchase is an existing home, or 10% if it is a new build.
The buyers don’t need to make any monthly payments, though the loan must be repaid after 25 years or when the home is sold.
CMHC also shares proportionately in any future gains or losses in home value. ie. they put in 5% now, they get 5% of whatever the value is when the loan is being repaid.
Most people come to me while they are in the process of shopping around for the lowest rate on their mortgage.
Looking for the lowest rate is what everyone is taught to do.
Rarely do people know that the mortgage rate is only ONE of the factors to consider when shopping for a mortgage. And if they are not shopping around it is because they “trust” the bank they deal with – but should they?
Life is busy, and shopping for a mortgage can be a daunting task.
I work for you. My job is to dive in to find out your financial goals and then match those goals with the best lender for your situation.
As an Accredited Mortgage Professional, I keep up to date and educated on the most recent information such as;
When shopping for the best mortgage, most Canadians stop too soon, and they only compare the rate and miss many more valuable comparables such as:
The biggest savings is often found where people don’t look, in the fine print.
The fine print in a mortgage is hard to understand, to begin with, not to mention trying to compare one bank’s fine print to another.
I can prove that there is anywhere from $35,000.00 – $50,000.00 or more in fees and higher interest costs over 10 years of your mortgage, separating the worst lenders from the best lenders.
This is my value, and this is what I can bring to the table.
The advice that you need to avoid huge penalties and fees, the simplicity of selecting the right lender for your situation with the lowest rate all while saving you loads of time trying to learn all this on your own.
I find the right lenders and show you your options, and you get to choose from there.
The lender that you pick then pays me for helping to put it all together.
You see, I save them time and money as well, and in return for that savings, they pay me for my services, so you don’t have to.
Most of the lenders pay the same or are so close; there is little to no financial advantage to me recommending one lender over another.
All of This Is To Say:
You get the advice you deserve, the bank saves time and pays me for my services.
This is a win, win, win for everyone involved.
My experience with matching clients with lenders has given me a vast pool of expertise. Practice makes perfect – and I am a professional when it comes to selecting the ideal mortgage for you.
If you have any mortgage related questions, reach out to me today, and I can answer them for you!
The decision may not be as hard as you may think. A balanced approach to both investing and debt reduction may provide you with the best
The investing world uses dollar-cost averaging. In the mortgage world we use mortgage payment optimization to achieve the same effect. Reach out to me, and we can automate additional principal payments to your mortgage and knock years off your amortization, Which will save you thousands of dollars in interest.
(Special) – The banks are very busy these days with Canadians lining up to make their annual Registered Retirement Savings Plan (RRSP) contributions. While contributing to your RRSP for retirement generally is a good idea it may not necessarily the best option for everyone in all circumstances.
Many Canadians at this time of year may be facing some difficult financial decisions, such a choosing between coming up with a lump sum of money to contribute to their RRSP or paying down the mortgage and/or contributing to a Tax Free Savings Account (TFSA).
One of the difficulties many Canadians have is coming up with a lump sum of money at one time to put in their RRSP. That’s why many advisers suggest people set up a system of making regular automatic contributions to their RRSP, or other retirement savings vehicles like a TFSA.
Automatic saving allows you to benefit from dollar cost averaging. This is an investment strategy of buying regular amounts of mutual funds or other investments every month or week, limiting exposure to market volatility and allowing investors to purchase more when markets are down and less when markets are up.
Financial experts would probably agree that paying down mortgage debt is a good idea, but realistically people should take a balanced approach and save for their retirement as well.
Scott Evans, an adviser with BlueShore Financial in Vancouver, says interest rates are an important factor in the decision whether to pay down the mortgage or contribute to your RRSP.
The Bank of Canada is slowing down rate increases and if you expect a higher rate of growth from investments than the rate of interest you are paying on your mortgage, then you may want to put more in your RRSP and less toward your mortgage.
“It’s not only about your objectives but your risk tolerance level and the rates you are paying,” Evans says. “It’s all about what you are comfortable with and what’s going to let you sleep at night.”
The RRSP and the TFSA both are effective financial savings tools and strategies but they serve different purposes and have different tax treatments, which can determine which one is right for you.
In general, your marginal tax rate — tax on income including government-tested income such as Old Age Security — will determine whether it’s better to invest in an RRSP or a TFSA.
If you expect that your tax rate will be lower when you retire than it is today, then an RRSP is probably best but if you expect to be in a higher tax bracket when you retire than you are now, the TFSA is probably the best option.
The reason is that contributions and earnings accrued in your RRSP are not taxed until they are withdrawn, which usually is not until retirement, at which time you probably will be in a lower tax bracket than you were in your working years.
Age also is a consideration.
Younger people these days generally are using a TFSA to save money because their incomes are often too low to take advantage of the tax deductions of contributing to an RRSP. As their careers develop and their incomes increase, they then can begin contributing to their RRSPs.
Focusing on saving and paying down debt at the same time may seem contradictory but a financial professional can help you find the balance that is right for you.
“Make sure you have and use the correct savings vehicles and your investments and financial strategies match your goals and tolerance to risk,” Evans advises. “It’s all about what you’re comfortable with.”
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.
Copyright 2019 Talbot Boggs
Talbot Boggs , The Canadian Press
The pronounced downturn in the country’s real estate market has not been enough to get the Canada Mortgage and Housing Corporation to lower the red flag it has been flying for the past nine quarters. The housing agency continues to see a high degree of vulnerability in the overall market.
The Canada Mortgage and Housing Corporation has declared the overall Canadian housing market to be “vulnerable” for the tenth consecutive quarter. This assessment factors in overall housing demand, pricing, new housing startups and other economic factors to determine the overall health of the Canadian housing market.
OTTAWA — Canada Mortgage and Housing Corporation says the country’s overall real estate market remains “vulnerable” despite an easing in overvaluation in cities like Toronto and Victoria in the third quarter.
The federal agency says this is the tenth quarter in a row where it has given the overall Canadian housing market a “vulnerable” assessment.
CMHC’s finding is based on a number of factors including the level of imbalances in the housing market related to overbuilding, overvaluation, overheating and price acceleration when compared with historical averages.
It says it has changed Toronto and Victoria’s overvaluation rating from high to moderate when it measured it against factors such as population growth, personal disposable income and interest rates.
The degree of overall vulnerability remains high in Hamilton, Ont., and Vancouver, where the housing market has cooled in recent quarters but property prices remain high compared to these economic fundamentals.
The Canadian Press
Credit Tip: While building or repairing your credit, you want at least two credit products (Credit Card, Line of Credit or Car Loan) with an original outstanding balance or a lending limit of $5,000.00 or more.
Both credit products should have at least the last 12 consecutive months with no missed payments.
The deed is done. You’ve missed a few payments, you’ve overdrawn an account or two, you’ve maxed out your credit and are hiding like an ostrich with its head in the sand.
Obviously, you do not want to be in this position, but do not fear. There are steps to take to repair your credit, that will get you into a position for a financially stable future and to even buy a house within a year or two.
That is if you begin today.
Does this sound good to you? Then keep reading.
The first step and the most important is to begin to make all of your minimum payments on all of your debt.
You can’t start rebuilding your credit until you start making your payments, even missing one payment can take you so far back that it will feel like you are starting over again.
Also, remember this is step 1, don’t worry about making extra payments at this point, just the minimums. We are trying to put out the fire, if your credit card says the minimum is $10.00, send them $10.00.
Its also better to spread the wealth here, don’t get caught making large payments on a single card trying to pay them off one at a time, to rebuild your credit you going to have to work on all of them at the same time.
CREDIT TIP 1 – Set an automatic payment for the minimum payment to be sent to your credit cards or lines of credit 2-3 days in advance of the actual due date. It can take that much time for your credit company to receive the payment. If you pay your credit card on the date it is due, and the bank doesn’t receive it for a few days they will mark that payment late; it may not show up on credit bureau but it will affect your relationship with that bank,
Bring all the balances on each card credit and line of credit to under your available credit.
I included this in Step 1.5 because some credit cards and line of credits will insist that any amount you are over on a credit card or credit line is paid as part of your minimum payment.
Ok, so here is what you are going to calm the fire.
Make all or as many minimum payments as possible. If you don’t have enough money to pay all your minimum payments, start with the smallest debt first and work your way up.
You would rather have three small credit cards in good standing, and one large account with a missed payment.
For the most part at this stage, the amount is ignored by the bureaus, they are just looking at how many cards have missed payments. So the fewer cards with missed payments the better!
So you’re caught up on all your minimum payments, now it’s time to start rebuilding your credit.
If your credit card’s limit is $2,500.00, bring your balance down to $1,250.
This goes for all revolving trade lines like personal lines of credit, credit card, and yes even store shopping cards that have 0% interest.
The reason for this revolves around a credit term called “Utilization”, but all you really need to know is that the bank wants you to have some credit ‘available’ to show that you can have credit under your name without using it.
Those with good credit can control their temptations, and don’t ever really max out their available credit.
With that said, it is better to have two $5,000.00 credit products with balances of $2,000.00 each than to have one credit product with a limit of $5,000.00 and a balance of $4,000.00.
I know it doesn’t make sense, and I would have to write a whole other post to explain this concept alone, but for now, just trust me, do your very best to keep the amount that you owe under 50% of your limit.
I won’t sugar coat this step, it’s a hard one because it means paying back some of your debt. Paying down your debt to get below this 50% threshold will take time, and early on you may not be even close.
So keep this threshold in your mind as a goal, and early on feel free to completely ignore this rule and jungle around debt to take advantage of low rate offers on other cards you may have.
PLEASE NOTE – don’t worry about the threshold if you can put all your debt onto a single low rate line of credit or consolidate your debt into a low rate credit card option. Your priority will always get the lowest rate possible than optimize how you are carrying your debt.
The goal is to have two trade lines at a minimum of $5,000.00 each with no missed payments 12 – 24 months.
When applying for a mortgage, the minimum timeframe with out a missed payment or collection is 12 months. If you have recently filled for a bankruptcy or a consumer proposal you need at least 24 months of no missed payments after you have been discharged.
These are the minimums, you could still be declined depending on other factors, but at least you have a target now.
Trade lines are any type of credit line that will go on your credit report. Car loans, credit cards, personal lines of credit and mortgages all count as trade lines.
I know, you need 2 tradelines but when your credit is so bad no one will give you more credit. While that may be true for the majority of credit card companies and Big Banks, but there are exceptions:
Now, these companies are likely not going to just give you a new credit card or line of credit on the spot without some sort of security. So be prepared to have to put down $250.00 – $1,000.00 as deposits for these cards.
The bank will keep your maximum balance at the amount of money you put down (similar to a debit card) but each month they will report to the credit bureau, which will improve your credit rating.
Big Banks traditionally decline these types of applications, even with security unless you are new to Canada or have no prior credit history. So feel free to start the application process at a major bank first, and then try the list above once you have been declined.
If your credit is OK, but you are just needing an extra tradeline, you may want to consider an investment loan. Buying an investment (for example, a GIC) at the institution that you borrowing the money from, can increase your chances of approval.
This is not the ideal path for repairing credit but should be seen as a last resort. If are you stuck, this might be an option to consider. Basically, you have a forced savings plan while still earning interest.
You pay the bank some interest for the loan, yes, but are also rebuild your credit at the same time.
Auto loans can also be a good way to build credit, but don’t get caught up in the purchasing process and buy a vehicle that you can’t afford. A lot of times as well they will get you excited about the vehicle and the interest rate will be extremely high.
I recommend that you try to find a vehicle with a payment that you can afford to pay off with in 18 months. This will ensure that you have recent credit when you apply for your mortgage for you new house, and will allow you to get pre-approved for more money as the payment will no longer exist.
Building credit is important, you want to do it quickly, but not too.
Try to apply for a new tradeline every 60 days, until you get 3-4 tradelines than stop. By waiting 60 days between applications you shouldn’t have any impact to credit, you may have heard that too many credit check can damage your credit. 60 days is more than enough time between checks to avoid this problem.
Remember you only need 2 tradelines, but by having 3-4 helps with balancing out utilization and shows maturity. Some of my past clients have had 15-20 open tradelines with limits exceeding $20,000 on each of them, and all with zero dollars owing on them.
Now that you have the right amount of tradelines, your balance’s are getting smaller and you can see your available credit start creeping up.
Stay Focused! Let your credit history grow as your debt declines.
The waiting game may be the hardest step if you’ve suffered from bad credit in the past. It will be tempting to go back to earlier spending habits once you see the available credit on your cards.
It is possible, but bouncing back from a credit history horror story does take a time and requires commitment.
The worse your credit trouble has been, the longer for it to bounce back.
12-24 months is standard for a credit ‘refresh’. Remember that poor credit performance in the past will not follow you forever.
A closed credit account will still show up when your report is pulled up. You will have to explain to the bank why it was closed.
Try to keep paid of cards open. Each month whether you use them or not credit cards report to your Credit Bereau and if they have a $0.00 outstanding balance, they look really good.
Change them to a zero annual fee and just let them sit there and help you boast your score, and as a bet of a PS, if you have 10 credit lines in the future, and you do make a genuine mistake, it will have less of an impact on your score than say you only have 1 credit card with a missed payment.
I recommend only closing them it the annual fee is too high, or if you really know that you will end up spending the money again.
This might be a scary process that you don’t want to do. We understand this.
Who wants to see their credit report if you know it is bad news? Yes, it is easier to avoid, but it won’t help you fix the problem. Looking at your credit report is a good step towards improving it, so next time you look at it, you don’t have to be afraid.
When you are applying for credit, banks will pull up your report. This will cause your score to go down if you apply many times in a short period of time.
This is different than never closing an account, you really don’t want to be applying for credit just for the sack of applying.
There is a special rule that applies to people who apply for credit too frequently, they are called “Credit Seekers”. Apply for 3-4 loans/lines of credit/credit cards in a month and you could be stuck with this label.
It will disappear as soon as you stop applying for credit, but why even worry about it, slow and steady wins this race. Keep the before mentioned 60 day rule in mind and slowly build your credit over time.
Everything you want to do in the future is made easier with good credit, and it comes quicker. You just have to buckle down and make sure you have a vision or dream of want you are working towards.
Grab a picture of that house you want to buy, tap it over your credit card, or even through them in a glass jar and put them in the freezer. Both tactics will remind you to think twice and evaluate whats more important, this purchase I am considering now, or that goal that I have in mind.
I would wish you good luck, but that would be leaving this process to chance, so instead, I am wishing that you can find the dedication, focus and commitment to move towards your goals, and to a secure financial future.
Getting your mortgage pre-approved will make everything easier in the long-run, but there are some things you should hold off on doing if you’re in the middle of a pre-approval period.
If you are looking to get pre-approved in Abbotsford or Chilliwack, start here first:
When you think of the first steps involved in buying a home, you’re probably thinking about talking to a real estate agent and viewing homes. In fact, these aren’t the first steps towards buying a home. The first steps happen months before, in the office of your mortgage broker.
That’s right, the very first step to buying a home should be applying for mortgage pre-approval. Applying for mortgage pre-approval in advance will allow you to address problems with your application, avoid embarrassing situations, and side-step the potential for financial hardship.
One of the key benefits of early mortgage pre-approval is that for the first time you’ll have an accurate view of your buying power. Your mortgage broker will use your income information and your down payment information to determine your maximum purchase price, and you’ll have a firm idea of how much home you can afford.
Once you know your maximum purchase price, you’ll know whether your buying power matches the types of homes and neighbourhoods you have in your sights.
If it doesn’t, you can increase your down payment, which will increase your buying power. There are three primary ways to increase your down payment amount.
First, you could save more money. The biggest drawback to this method is that it typically takes the longest amount of time.
Second, you could ask for a financial gift from your family. About 15 percent of homes purchased between 2014 and 2016 used a down payment gift according to the latest stats from Mortgage Professionals Canada.
Third, you could take advantage of the Home Buyers’ Plan, which is a government program that allows first-time homebuyers to borrow up to $25,000 from their Registered Retirement Savings Plan (RRSP) to put towards their home down payment. The extra $25,000 could increase your buying power significantly.
Let’s say you had saved a $25,000 down payment, and have a combined family income of $125,000. Your maximum purchase price is $500,000. But if use the Home Buyers’ Plan and double your down payment to $50,000, your maximum purchase price will increase to $634,100. In some neighbourhoods that may be the difference between buying the home of your dreams and making some serious compromises.
The money you withdraw from your RRSP under the Home Buyers’ Plan can be used for your down payment, closing costs, or even to purchase furniture after you move. The money must be repaid over a 15-year period.
Whether you take the time to save more money for your down payment, ask your family for a monetary gift, or take advantage of the Home Buyers’ Plan, applying for early pre-approval will give you a clear idea of how much home you can afford so that you can adjust your expectations accordingly.
Applying for early mortgage preapproval can expand your home buying options, especially if you weren’t open to a home in need of renovations. Applying for pre-approval can give you a leg up on your application for the Canadian Home Renovation Plan, which allows homebuyers to finance an additional 10% of the total purchase price for home improvements or renovations. The maximum amount you can finance is $40,000, and this amount is added to your mortgage amount and paid off over time.
With up to $40,000.00 available for renovating your home, there are limitless ways to customize your home to your liking. What renovation would you do, Kitchen Bathroom, or new flooring?
So if you’ve previously turned away from homes in need of new kitchens or bathrooms, the Canadian Home Renovation Plan could help you turn that no into a yes, and expand your home buying options dramatically. The program requires you to communicate with contractors and obtain quotes, so starting early is a good idea.
While Canada has been living in the era of ultra-low interest rates for almost a decade, mortgage interest rates have been slowly creeping up over the past year and a half. If you know you want to buy a home soon, and you want to take advantage of today’s low rates, applying for mortgage pre-approval will help you achieve this goal. Mortgage pre-approval comes with the option to lock in a specific mortgage rate for a certain number of days, usually 120 days. Rate holds are usually applied to fixed-rate mortgages. If rates rise during your rate hold, you are entitled to the lower rate. If rates drop, your mortgage broker will renegotiate the lower rate on your behalf.
Most people are aware of down payment requirements when it comes to searching for a home, but what about closing costs? Closing costs include legal fees, land transfer tax, property taxes, home inspection fees, and more. A good rule of thumb is to budget between 1.5% and 4% of the selling price for closing costs.
If you haven’t budgeted for closing costs yet, now is the time to start. If your home buying budget is $300,000, you’ll need at least $4,500 saved for closing costs, on top of the $15,000 minimum down payment.
When you apply for mortgage pre-approval, your mortgage broker can supply you with a list of common closing costs for your area, and advise you on whether you have enough money saved. If you don’t, an early mortgage pre-approval means you have plenty of time to get your ducks in a row before you begin searching for your new home in earnest.
A good mortgage broker will provide you with a checklist of everything you need for your final mortgage application, but going through the pre-approval process is a good way to determine whether there are any red flags to address right away.
Common items like proof of down payment, income verification, and your credit score will all be checked during the pre-approval process, which will give you time to rectify any errors well in advance. Your mortgage broker will also advise you on common mistakes to avoid between getting pre-approved and final approval. Common mistakes to avoid include:
These are major life changes that can affect your ability to qualify for a mortgage. In most cases, you should wait to make these life changes until after you become a homeowner.
Your credit score is a major part of your mortgage approval, so the time to check your credit score and report is during the pre-approval process.
You can order a copy of your credit report from one of the two major credit reporting agencies in Canada: Equifax or Transunion. Alternatively, you can request a free copy of your credit score and report from a company like Borrowell.
It’s important to ensure the information listed on your credit report is correct, and if you catch any errors, report them immediately to both credit agencies. Common mistakes include:
Credit accounts that are not attributed to your account
Credit accounts that are attributed to your account but do not belong to you
Some errors, such as a misspelt name will not directly affect your credit score, but others, like misattributed credit accounts, can negatively affect your credit score. Since your credit score is an integral part of the mortgage pre-approval process, it’s important to get these errors fixed promptly. The process of fixing errors on your credit report and seeing the change reflected on your credit score can take up to six months, which is why it’s a good idea to apply for mortgage pre-approval early.
In all of these cases, getting early mortgage pre-approval will take the pressure off and give you time to make sure you are ready for the home buying process. Buying a home is stressful, and early mortgage pre-approval helps alleviate some of that stress.
If you’re looking at buying a condo in Abbotsford or Chilliwack this year, there are a couple other considerations if you have pets. Not all condos are pet-friendly. Some condo complexes even ban pets outright, or sett limits on number, breed or size. Prior to submitting an offer, it’s important to research the condo corporation’s by-laws and procedures to ensure you don’t have to make the choice between the home of your dreams and your furry family member.
Learn more by reading my article here: https://www.clearhome.ca/links/?b=MattRobinson&l=1802
Renovating a home with the intention of selling it to make a profit is a booming industry in the house world. Before you start any home renovations, there are some areas of your home that you should focus on to give you the highest return on investment.
To help, your local Chilliwack mortgage broker, Matt Robinson with Dominion Lending Centres has listed five areas in your home that should be the first place you renovate.
Renovating your bathroom is a must because people can definitely tell if you have spent a decent amount of money purchasing high-quality materials. This increases the overall appeal of your home and gets more buyers interested in making an offer.
Bathroom repairs are averaging at least 100% return on investment. Therefore, really take your time picking out the best bathroom tile, and look up free sources online that provide helpful tips to give your bathroom a more modern look.
Whenever you decide to renovate your kitchen, it will generally cost you thousands of dollars. You may not think this is worth it, but depending on how your kitchen looks can really make or break a purchasing deal. A small kitchen renovation could cost you around $21,000 and resale value is around $17,000, which means you could earn back 81% of the money put into this renovation.
#3: Garage Door
Replacing your garage door may not seem like a big deal, but it can actually make buyers less interested if your garage is in poor condition. You can replace your garage door for an average price of $3,500 and your resale value could be around $3,400, which gives you about a 98% return on investment.
#4: Curb Appeal
Updating your curb appeal is important because this is the first impression your property makes on potential buyers. If you do not renovate the exterior of your home by fixing areas where the paint has chipped or by planting new fresh flowers and grass, you could deter buyers from ever entering your home. Consider these useful tips and also add fresh mulch to give the exterior of your home a cleaner, fresher look. For more useful tips on ways to improve your curb appeal, please contact your Chilliwack mortgage lender at 604.852.1703.
#5: Wooden Deck
You may want to consider adding a wood deck in your backyard to increase seating space and make this area look more inviting. The average cost of placing a wood deck is about $11,000 and the average resale value is around $9,100, which means you could be making about 83% return on investment.
If you would like to know more information on top renovations that give you the highest return on investment or if you are wanting details on different Chilliwack mortgage options available, please contact Matt Robinson at 604.852.1703.