General

15 Jan

Will the Bank of Canada Cut Rates Next Week?

General

Posted by: Stephanie Blake

 

 

15 JAN 2016

WILL THE BANK OF CANADA CUT RATES NEXT WEEK?

Will The Bank of Canada Cut Rates Next Week?Expectations of a Bank of Canada rate cut next week are mounting and for good reason. The Canadian economy is showing signs of considerable weakness and business investment plans have been cut. Oil prices continue to decline sharply and Iranian oil supply will be coming on stream shortly. Energy companies continue to slash payrolls and dividends. Alberta’s economy will contract sharply this quarter and although the Canadian trade deficit has improved, the decline is nowhere near sufficient to offset the dampening effects of the oil rout, despite the sharp decline in the loonie.

The loonie has just posted its worst 10-day performance since it was allowed to trade freely against the U.S. dollar in 1971. Part of the reason the Canadian dollar has fallen so much is the widening prospect of a Bank of Canada rate cut on January 20–a quarter-point cut to 25 basis points, its lowest level since the 2009 financial crisis. Is this warranted? I think so. The Bank cut rates in a surprise move this time last year when the economy was newly hit by the oil price decline. Since that time, oil prices have  declined dramatically further, especially for Canadian oil.

Some have argued that oil prices will remain low for an extended period and see the prospect of an initial public offering (IPO) of Saudi Arabia’s oil company, Aramco, as a sign of the end of the oil age, triggered by excess supply and  international efforts to combat global warming. Saudi Arabia sees the need to diversify its economy away from oil and so should Canada.

It is not that another rate cut will have a dramatic effect on the economy–with interest rates already so low, the Bank has little ammunition left, even if they take rates into negative territory, as they suggest is possible. They might be reticent to encourage household borrowing at a time when debt levels are at record highs and the government has taken actions to slow the growth in housing. Nevertheless, some Canadian banks nudged up mortgage rates recently, and a BoC rate cut might discourage further increases and could even trigger a rollback.

Fiscal stimulus is certainly coming, but when and how is still uncertain and the economy needs all the help it can get. Market interest rates are at record lows, the stock market has fallen sharply this year, and consumers are worried as food prices continue to rise, which hurts lower-income Canadians proportionately more than others.

In addition, the Federal government has gone ahead with its high-income tax increases (as well as middle class tax cuts), which could well discourage entrepreneurs, business investment and job creation. The tax increases to levels well above those in many other countries also make  it more difficult for Canadian business to attract foreign talent. The decline in the Canadian dollar, while boosting exports and foreign investment, reduces the value of the money Canadians earn and invest. The negative wealth effect damages consumer confidence.

These are difficult times for Canada and extreme measures should be taken. The Bank should cut rates and the government should introduce larger increases in infrastructure spending than were promised during the election campaign. None of Canada’s economic pain was our own doing, but counter-cyclical policy measures can and should reduce the pain as we work our way towards a more diversified economy.

Will The Bank of Canada Cut Rates Next Week?

DR. SHERRY COOPER

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

 

 

 
26 Nov

First Time Home Buyer Tips!

General

Posted by: Stephanie Blake

TIPS ON GETTING READY TO BE A FIRST TIME HOME BUYER

Tips On Getting Ready To Be a First Time Home BuyerVery often, the first question is “what can I afford”. To answer this for a person getting ready to buy, we need to know about what is happening now, income, bills, savings, credit score etc. There are many positive things that you can do in the year or two prior to buying.

It is always best to consult with a Mortgage Broker well in advance to get started on the right path to becoming a home owner. If you already have some savings set aside, then you already have a great head start!

Here are some simple notes and tips to get you well on your way.

Special Income Note:

If using commission, lenders want to see a 2 year average income for commission/bonus income to use it at all. So file your Taxes each year and keep your NOA, Notice of Assessment that is mailed to you.

Down Payment:

You need to have a minimum 5% of the purchase price Down Payment and 1.5% of purchase price in your own funds. This CAN be gifted from an immediate family member.

Ex.

$300,000 home = $15,000 minimum Down Payment, plus $4,500 for Closing costs

$200,000 home = $10,000 minimum Down Payment, plus $3,000 for Closing Costs

Co-signer or Co Borrower:

IF you can have a parent with good income and credit go on as a guarantor for your mortgage, then we can add their income to the file to strengthen your position.

IF you have a partner/co borrower, then their income, credit score etc. can be added to the mortgage as well to strengthen the file.

Budgeting – Try Mint.com – Free:
www.mint.com

Start tracking your expenses, start with what you think you spend and see/track the reality (1-2months!) Set up bill date reminders and get notifications on your cell phone when you go over budget!

Find and stop the bleeding; unnecessary spending that can add to your savings.

NOTE: 3% of all unsecured debt has to be used as payment – even though reality payment is lower. $10K on a credit card = $300.00 payment and nearly $75,000 less mortgage buying power!!!

Crazy…..pay them down as much as possible!

Saving in RRSPs :

Save on Income Tax for filing next spring, lock it away!

Able to use up to $25,000 each TAX FREE as a First Time Home Buyer on a qualifying home value. Once you know what you can save per month, we can make it automatic (like a bill payment) OR you can save organically and then deposit every month or two into your RRSP account.

CALL ME – I have access to full line of Bank Products; RRSPs, TFSAs, Lines of Credit, Visa etc.

Check your Credit Score:

Equifax Customer Inquiries 1-800-465-7166

Pull your own credit bureau. Identify any errors or issues and fix now. You can call me when you get it, we can review and I can provide some tips on how to improve if need be!

Pay all bills on time, more than minimum payments!

Use NO MORE than 50% of available limit on cards – Going over 65% of limit reduces your score – EVEN if you are NOT over limit! Easy TIP: Pay on time and pay down debt a bit over next few months….then call to increase your limits! This will lower your % of credit utilization immediately for free and be a plus to your credit score.

Become a Rock Star that any lender will want to work with!

I really hope that this helps you in starting forward progress – starting is the hardest, but then it quickly becomes normal. Remember – we here at Dominion Lending Centres are here to help!

 
19 Nov

How To Avoid the 7 Biggest Mistakes Refinance Shoppers Make

General

Posted by: Stephanie Blake

Whenever interest rates drop or housing values jump, a refinancing frenzy follows. Whether you are looking to trim your mortgage payments, eliminate credit card debt or renovate, experts say you should fully understand all the options available to you before deciding to refinance. Here are some common pitfalls that consumers can avoid when refinancing:

1. Check interest rates to see if your new rate will pay off the penalty for leaving your present mortgage. It is best to decrease your interest rate by at least .75% to 1%. This would save you $100.00 a month on a $150,000 mortgage.

2. Know what your costs are – Check with your bank to find out what the penalty would be for an early payout.. It may be 3 month’s interest or more.. Don’t tell them you are moving your mortgage or they will pass you on to a high pressure salesperson who will try to talk you into coming into the branch to discuss the issue. It’s easier to say you are thinking about paying out your mortgage early.

3. Be sure to compare apples to apples- Make certain the rate you were quoted over the telephone was for a similar product. Comparing 3 year rates at one lender to 5 year rates at another is like comparing apples to oranges.

4. Overvaluing your Home – pride of ownership sometimes overshadows our common sense. You may expect the value of renovations to be equal to the cost of labour and materials. While return on investment for new carpeting or new paint jobs is close to 100%, it can be as low as 15% for a granite entranceway. Some people use their tax evaluations which may be too high or too low. Consider checking with your realtor or someone who recently sold their home on your street.

5. Not considering future plans – getting locked into a 10 year fixed rate when your kids will be leaving for college in 3-5 years may not be a smart move. If you are planning on buying a vacation home or an investment property why not plan for it now? You might be able to get it sooner than you expect.

6 Don’t let low interest rates or catchy slogans stop you from shopping around. Often the lower rates come with unattractive conditions: they may not be portable to a new home, the interest rate may only be available in one province, or you may be tied to the mortgage unless you have a bonafide sale of the home.

7 Finally don’t go to your present bank first. If you don’t know the rates you won’t get the best rate. The major reason people go to their present lender is convenience. There is comfort in “being known” and a belief that they should receive special treatment. The reality is that all lenders are under pressure trying to process the unprecedented volume of refinances. They have to set priorities. And you would be a low one as they already have your loan. They may lower your present rate from 3.99% to 3.79% to pacify you but if you shopped around you might find that other lenders are offering 3.19% at this time.

In conclusion, be a good consumer. Consult with your Dominion Lending Centres mortgage professional who can review the best options with you. We can help you make an informed decision on your finances.

 
4 Oct

Do You Have a Chocolate Covered Mortgage?

General

Posted by: Stephanie Blake

I have something shocking to tell you.  Ready? Canadian banks are a business like any other.  Gasp and shock!  This is nothing less than the truth.  They are mandated to produce profits and provide their shareholders with a dividend at the end of the year.  This is accomplished by charging us service fees and interest on loans and in a wide variety of other ways.  Given that the Canadian banking system is one of the strongest in the world which in turn benefits our economy as a whole, I certainly do not begrudge them their right to a profit.  So why am I drawing attention to this you may ask, well I will tell you.   

                  As a mortgage professional I am often told that people would rather stay with their bank because their bank has been so good to them or because the family has been with that particular bank for generations and I am genuinely baffled by the prevalence of this attitude.  Of course your bank is good to you!  You are a good person who pays your bills on time, has an account, or several, which generate a monthly service fee, and when you have borrowing needs you go to them and they lend you the funds at a reasonable rate.              When it comes to a mortgage though the loyalty you feel to your bank and the assumption that they will take care of your best interests can come with a high cost if you don’t understand the fine print.  Let’s look at some of the things you need to be aware of shall we?

  1. Best Rates – I see this so often.  Clients come in with their bank’s best offer which is considerably higher than the going market rate only to be told the bank is able to match after they spend a pile of time rate shopping.  Your mortgage rate determines your payment and affects your family’s budget.  Make sure you get the best rate you can.
  2. Prepayment Penalties – In Canada there is no set standard as to how the banks and other mortgage providers have to calculate the penalty if you break your mortgage.  A mortgage is a contract after all.  The banks have a right to expect a certain rate of return on the loan they have made to you but life happens and a major event can cause you to need to break your mortgage so make sure your penalty will be calculated reasonably.  I have seen this amount vary from $4200 to over $10,000 given the policy of the lender involved on the exact same mortgage amount and time remaining in the term.

Lenders are required to disclose the calculation to you but you need to be aware that some banks will calculate your penalty in a way that is most lucrative to them.

  1. Collateral Mortgages – Many of the banks now register your mortgage differently.  Say your mortgage is $250,000 but your home is worth $300,000.  In this instance the bank would register a charge on the title of the home for the higher amount.  The reason is so that if down the road you wish to get a home equity line of credit that you do not have to pay the legal fees again to do so.  That can be a useful tool.  The flip side is that this type of a mortgage is trickier to switch to a new lender at renewal.  You may not be able to take advantage of todays’ crazy low rates in a fee free switch if you have this type of a mortgage.

 

Placing your mortgage with your own bank does not all of a sudden turn it into a chocolate covered treat or make it any more prestigious.  It can actually be very costly in the long run to choose one lender over another without educating yourself on their policies. Make sure you are choosing the best overall mortgage so that you are ready for anything life hits you with.

2 Oct

Breaking up is Hard to Do!

General

Posted by: Stephanie Blake

Sharing a blog post written by a colleague….                                                        

So the reality of the world is that a large number of marriages end up in divorce.  This is a hard enough time in anyone’s life so the lenders and the mortgage insurers have come up with a product that can help.  It is the ability to refinance your matrimonial home up to 95% of its value to payout your ex their portion of the equity and perhaps even some of the debts you incurred together.  This is a specialty product and there are certain things you must do.  Let’s take a look shall we??

Step 1.  You must complete a legal separation agreement through a lawyer.  Even if it is the most amicable split in the history of mankind, this has to be done.  The reason for this is you want your rights protected fully.  If you are the one staying in the house, you want to make sure that your ex has legally and irrevocably given up their rights to the home.  If you are the one leaving, you want to make sure that your name is removed from the title so there is no question of you have any further obligation where it is concerned.   There will be a cost associated with the legal separation agreement. How much?  I would not dare to say but I would budget a bare minimum of $2500.  It is also important to keep in mind that legal matters often take more time than anticipated so don’t imagine you will be able to get this completed in a hurry.  Make sure that you address any debts taken on during the marriage.  These can be paid out from the proceeds of the new mortgage but only if they are listed.

 

Step 2.  Order an appraisal.  This has 2 reasons.  The first is that you and your ex will be able to determine the true value of the home through an impartial third party.  The second is that most lenders require it in this situation.

Step 3. Write up an offer to purchase.  This one always catches people off guard.  Why should you have to write up an offer to purchase on a property you already own?  The answer is just this.  The lenders require it.  This legally binding document shows the agreed upon price and the final closing date to which both parties have agreed. This can be completed through your lawyer, with the help of a willing Real estate professional or on your own with a form available online.

Step 4.  Get a mortgage.  You have likely been in contact with your mortgage professional before now but if not, then now is the time.  You are going to have to provide:

  • Separation Agreement
  • Appraisal
  • Offer to Purchase
  • Letter of employment and Paystub
  • Last 2 years Notice of Assessments or T4’s
  • Any other required documentation

It is very important to note that you will incur new mortgage insurance premiums if you go right to 95% of the home’s value even if you had already done so on the same property.  This is a brand new application with you as the sole borrower so a full new premium applies.   This is how it could look:

 

 

Home Value              $300,000

5% Equity                    $15,000

New Mortgage for   $285,000

Insurance Premium $8977.50

Total Loan            $293,977.50

 

So that my mortgage minions is a product which can help you through a very challenging time.  As always we are more than happy to answer any of your questions.  Until next time!