Archive for November 2008

During the past 15 years, residential mortgage credit has expanded at an average rate of 7.2% per year, which is slightly faster than the 6.9% growth rate for total household and business credit.

With this, more and more Canadians are utilizing the resources of a Mortgage Broker/Specialist when shopping for financing.  Forty percent consulted a Broker last year, up from the 28% the year before, and, 35 percent of new mortgage were taken out through Mortgage Brokers.

Why are borrowers increasingly reaching out to Brokers? 

If you are new to the world of real estate investing or purchasing, it can seem very intimidating.  We all know a thing or two about purchasing real estate from watching tv and reading newspapers and books.  However, the best advice we can offer is to surround yourself with an expert network of advisors.  With the vast quantity of lenders and products available to home-buyers it can often times become overwhelming and confusing.  Why should you have to sort through hundreds of lenders and products to try and determine what type of financing is best suited for you and your needs?  Why not leave it to the experts…

At MBN, our Calgary and Southern Alberta Mortgage Specialists are well versed in the world of mortgages and financing.  With over 25 years in mortgage and real estate experience we have researched all the lenders and products available to you and are able to determine a financing solution best suited to your immediate and long term needs.

When we sit down with you we will not only discuss your immediate financing requirements for your upcoming purchase or refinance but will also discuss with you your long terms goals.  Your long term goals are often neglected when arranging your financing, but are imperative when planning your future and using your home as an investment tool for your retirement.

Contact your Calgary and Southern Alberta MBN Mortgage Specialist at 1.866.955.9662 or by visiting us at www.mbnmortgage.com

Copper tumbled more than 5% on Monday and aluminum sank to a three-year low on a weaker consumption outlook for metals in the face of a global downturn.  European Shares dived with miners among the 10 biggest losers on Britain’s share index.  The price of copper – often seen as a key gauge of real economic activity – more than halved and closed at $3,660, down $160, or 5.8 per cent since Friday’s close.

The National Association of Business Economists’ poll of 50 professional forecasters released on Monday found that real gross domestic product in the United States was expected to fall 2.6 per cent in the fourth quarter and slump 1.3 per cent in the first three months of 2009.

The picture was no different in Europe. The Confederation of British Industry forecast that Britain will suffer its sharpest economic contraction in almost two decades next year, and unemployment could rise to almost three million by 2010.

Are you waiting to see if your Metal Market Stocks will sky-rocket back up?  The latest economic forecast shows that may be a long wait.

What should you do in the interim?  Why not transfer your investments to a safer, more secure opportunity with the MBN (7-1) Bond Fund that offers a fixed 7% rate of return, compounded annually.  Void of fees and commissions, your investment grows and provides you with the peace of mind that your retirement is being well taken care of.

Contact your MBN Bond Fund Specialist today at www.mbnbondfund.com to see how transferring your investments to the MBN Bond Fund (with its 7% fixed rate of return) can be the difference between surviving your retirement or thriving in your retirement.

Act now…Your Retirement Is Too Important To Leave To Chance…The MBN Bond Fund

MBN Mortgage

November 17, 2008

Globeandmail.com

The obvious difference between an Interest Only Loan and a Principal and Interest Loan is that with Interest Only you are not paying down the principal balance of your mortgage.  This means you could possibly owe exactly the same amount after your term ends as when you started.

If this is the case, why would you want an Interest Only Loan?  For many home owners it provides the flexibility they want when searching for a mortgage; for others it enables them to purchase more house for a lower monthly payment, and, for investors it may enable them to purchase rental properties and maximize their cash flow.  Whatever the reason, interest only loans provide an appealing alternative to home buyers.

 How would your monthly payment differ with an interest only mortgage versus a principal and interest mortgage?  See below.

Principal and Interest Home Loan using a $100,000.00 mortgage:

Mortgage Payment = P [ i(1 + i)ⁿ ] / [ (1 + i)ⁿ - 1]  where Interest (i) equals r/12.

For our $100,000 mortgage at 5% compounded monthly for 15 years, we would first solve for i as: i = 0.05 / 12 = 0.004167 and n as 12 x 15 = 180 monthly payments

Next we would solve for (1 + i)ⁿ = (1.004167)¹⁸⁰ which yields 2.11383. Now our formula reads Mortgage Payment = P [ i(2.11383)] / [ 2.11383- 1] which simplifies to Mortgage Payment= P [.004167 x 2.11383] / 1.11383 or:  Mortgage Payment = $100,000.00 X 0.00791 = $791.81

Versus Interest Only Mortgage:

Mortgage Payment = (Mortgage Amount X Interest Rate) / 12 months which equates to:

Mortgage Payment = (100,000.00 X 5.00%)/12 = $416.67

*It is obvious that an Interest Only Mortgage offers a drastically decreased payment amount on a monthly basis, which may be a great feature for some home buyers.  It is important to take into consideration all factors when determining your mortgage requirements.

When choosing the type of mortgage you want, speak with your Mortgage Specialist and discuss what the most important factors in a mortgage are for you.  Is it monthly payment amount, the lowest interest rate, the ability to pay off your mortgage without a penalty? 

The terms of your mortgage should be chosen based on your unique mortgage needs and we can help you with this.  For further information contact your MBN Calgary and Southern Alberta Mortgage Specialists at 1-866-955-9662.

MBN Mortgage

*may vary

The U.S. government and the country’s mortgage sector on Tuesday announced plans to help homeowners behind on their house loans.

Roughly four million U.S. homeowners were behind on their mortgage payments or in foreclosure in June, according to data from the Mortgage Bankers Association. 

To qualify, homeowners will have to be at least three months behind on their payments, and owe more than 90 per cent of the value of their house.  Anyone who does not occupy their home would not qualify for the aid, nor would borrowers who have gone into bankruptcy.

The government’s plan would see interest rates cut so that borrowers would wind up not spending more than 38 per cent of their income on house payments. Another option is for loans to be extended from 30 years to 40 years, or for some of the loan principal to be deferred.

“Foreclosures hurt families, their neighbours, whole communities and the overall housing market,” said James Lockhart, director of the U.S. Federal Housing Finance Agency. “We need to stop this downward spiral.”

Lockhart’s agency seized control of two mortgage finance companies, Fannie Mae and Freddie Mac, in September. Together, Fannie Mae and Freddie Mac own or guarantee almost 31 million U.S. mortgages, or about 60 per cent of all outstanding mortgages.  The new plan is hoped to be in place by Dec. 15.

So How does the US Mortgage Market compare with the Canadian Market?

Despite this past month’s financial sector turbulence and the heightened concerns over the US economy, Harper said the Canadian Financial Institution remains in “very good shape.”  All information provided to Harper’s government has indicated that while there are banks that have had significant write-downs, none near the extremity of AIG, the balance sheets of the financial sector remain strong.

Harper is further supporting Economists’ suggestions that the troubles in the US should not “spill over into Canada.” Canada has strong economic fundamentals and a government that has been prudent and pro-active.  The Canadian government anticipated the US bubble would burst over a year ago and the crisis this week was not surprising, nor unexpected.  It is however, not expected to affect Canada to anywhere near the extent it has affected the US. 

There is no direct tie between the US housing market and the Canadian housing market and Canada’s strong economy and dearth of high-risk mortgage lending should help the real estate sector withstand the volatility that has been buffering the equity markets.   Ultimately, the Canadian market should be relatively unscathed by the turbulence experienced in the US.

MBN Mortgage

CBCNews.ca

November 11, 2008

In the midst of the worst financial crisis since the Great Depression, Canada has joined the ranks of governments that in recent weeks stepped up to help banks cope with more fallout from bad U.S. subprime mortgages. In Canada’s case, however, the reason for the assistance is a little different from some of its G-7 partners. Unlike banks in the U.S., Britain and Germany, which needed to be bailed out with hundreds of billions of dollars in new capital, Canada’s major banks are solid and solvent. They don’t need any help to work through their subprime exposure.

So why did Ottawa agree to insure the money they routinely borrow from other banks, a practice that keeps their credit operations liquid? Ironically, the troubled non-Canadian institutions that received capital injections and loan guarantees in other countries now carry a government seal of approval that tilts the playing field in their favor when it comes to borrowing. That leaves Canada’s big banks, including Scotiabank, TD Bank Financial Group, RBC Royal Bank and CIBC, at a competitive disadvantage. So the government acted to level the field, not to aid troubled banks.

Why has Canada withstood the subprime tornado better than other countries, and should the Canadian banking system be a model for G-7 and G-20 leaders when they gather in Washington on Nov. 15? Consider that the Geneva-based World Economic Forum, an influential think tank whose annual conference attracts the likes of Bill Gates and Tony Blair, earlier this month ranked Canada’s banking system as the soundest in the world. The U.S. came in at No. 40, and Germany and Britain ranked 39 and 44, respectively. (Switzerland was No. 16, just ahead of Namibia.) “For Canadian banks, having higher capital ratios than anyone else in the world is a source of pride,” says analyst Mario Mendonca with Toronto-based investment bank Genuity Capital Markets.

The average capital reserves for Canada’s Big Six banks — defined as Tier 1 capital (common shares, retained earnings and non-cumulative preferred shares) to risk-adjusted assets — is 9.8%, several percentage points above the 7% required by Canada’s federal bank regulator. That’s a little better than major U.S. commercial banks like Bank of America, but significantly higher than an average capital ratio of about 4% for U.S. investment banks and 3.3% for European commercial banks.

Another factor that helped make Canada the new gold standard in banking was Ottawa’s decision in the late 1980s to allow commercials banks to acquire investment dealers on Toronto’s Bay Street, the country’s financial hub. As a result, these institutions are subject to the same strict rules as commercial banks, while U.S. investment dealers are subject to only light supervision from the Securities and Exchange Commission. Morgan Stanley and Goldman Sachs, of course, will now be under the U.S. Federal Reserve’s supervision since they have been chartered as bank-holding companies.

Canada’s banks make bad investments on occasion. When Toronto-based CIBC, Canada’s most aggressive big bank, took $3.5 billion in charges against the U.S. subprime debacle, federal regulators quickly arrived on the scene. But here’s the difference: CIBC ended up selling $2.94 billion worth of its own shares in the first quarter of this year to shore up capital reserves. “The relationship between government and banks is a positive one,” says Minister of Finance Jim Flaherty. “We have a lot of discussions and regular meetings. The common goal is a sound financial system.”

There is, of course, a flip side to Canada’s regulatory system. When the global economy was flying high, Canadian banks complained about not being allowed to merge to become more significant international players. “In hindsight, that decision may have saved Canada from having a Royal Bank of Scotland on its hands,” says Lawrence Booth, a finance specialist at the University of Toronto’s Rotman School of Management, referring to the overly ambitious bank’s bailout earlier this month by the British government.

Says FFlaherty: “The credit crisis we’re facing is the result of unbridled greed. We need to bridle greed.” Perhaps when world leaders sit down in Washington to forge a 21st-century New Deal for the global financial system, it may have more than a smattering of Canadian banking know-how.

MBN Mortgage

TIME

Monday November 10, 2008