Archive for the ‘General’ Category

Governor Mark Carney hiked the Bank of Canada Overnight Rate by 25 basis points to .75% this morning but said the growth outlook is weaker than originally forecast. The debt crisis in Europe and slow recovery in the US will both affect Canadian economic growth for the balance of the year.

Economic activity in Canada is unfolding largely as expected, led by government and consumer spending. Housing activity is declining markedly from high levels, consistent with the Bank’s view that policy stimulus resulted in household expenditures being brought forward into late 2009 and early 2010. While employment growth has resumed, business investment appears to be held back by global uncertainties and has yet to recover from its sharp contraction during the recession.

The Bank expects the economic recovery in Canada to be more gradual than it had projected in its April MPR, with growth of 3.5 per cent in 2010, 2.9 per cent in 2011, and 2.2 per cent in 2012. This revision reflects a slightly weaker profile for global economic growth and more modest consumption growth in Canada. The Bank anticipates that business investment and net exports will make a relatively larger contribution to growth.

Inflation in Canada has been broadly in line with the Bank’s April projection. While the Bank now expects the economy to return to full capacity at the end of 2011, two quarters later than had been anticipated in April, the underlying dynamics for inflation are little changed. Both total CPI and core inflation are expected to remain near 2 per cent throughout the projection period. The Bank will look through the transitory effects on inflation of changes to provincial indirect taxes.

Reflecting all of these factors, the Bank has decided to raise the target for the overnight rate to 3/4 per cent. This decision leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending, and the uneven global recovery.

The Bank of Canada may pause on its rate increases to assess the effects of the 2 increases already implemented before announcing any further rate increases.

After years of paying down your mortgage, you’ve built up a significant amount of equity in your home. Instead of using costly credit cards or high-interest bank lines of credit, you can use that equity to your advantage with a home equity loan or line of credit. And, you’ll save a considerable amount of money in the process.

 Home equity loan: This is a traditional loan in which a borrower uses built-up home equity as collateral. Following approval, the homeowner receives a lump-sum payment and makes fixed monthly payments over a predetermined period of time.

 Home equity line of credit (HELOC): Like a line of credit, homeowners can draw funds as needed, up to a set limit. Once funds are drawn, the borrower must pay a minimum monthly payment and can repay the entire amount owing at any time. Unlike a traditional home equity loan, interest is only paid on funds that have already been withdrawn.

 Two major uses of home equity-related financing are home renovations and debt consolidation. Renovations that can potentially boost the value of a home can offset the up-front borrowing costs. Similarly, using home equity to shift debt from high-interest credit cards to a much lower-interest loan can significantly reduce interest payouts and improve overall cash flow.

 As with all forms of debt, however, homeowners should always borrow conservatively by staying well within their overall debt limits and should always try to pay more than the minimum payment to maximize credit ratings and reduce long-term interest payments.

 A mortgage professional can review your home equity options and compare this borrowing method to other financing alternatives.

For more information, contact me today!

                                                                                                                      Home buying 101

What eager first-timers need to know before the house hunt

You’ve saved for your down payment, you’ve crunched the numbers and you’ve decided on the neighbourhood where you want to live – but are you really ready to start shopping around?

“Buying your first home is one of life’s most exciting milestones, but there are lots of steps on the way to crossing the threshold as an owner for the first time,” says Brad Gavin, mortgage consultant with Mortgage Intelligence in Calgary. “To make sure this process goes smoothly, you’ll need to get financing advice right from the get-go and do some work in advance.”

Brad breaks the process down with the following tips: 

Get your down payment and deposit ready. A down payment must come from your own resources, and in most cases must have been held in your account for at least 90 days. Using a gift from your parents or other family member for a down payment?  You’ll need a letter stating that it is actually a gift and does not need to be re-paid. These funds will likely need to be deposited in your account two weeks before your purchase closing date.

The Home Buyers’ Plan is another financing option for first-time buyers. It allows you to withdraw up to $25,000 ($50,000 per couple) from your RRSP to buy or build a home. 

Keep in mind that when placing an offer, a deposit is usually required. It can be all, or part, of a down payment.

Figure out what you can afford. The best way to do this is by talking to a mortgage expert and getting pre-approved for a mortgage. A mortgage consultant can provide examples of what monthly payments and home buying costs will be, to eliminate surprises.

“A major benefit of a pre-approval is that most financial institutions will lock-in a rate for up to 120 days,” advises Brad.  “This is very helpful if you’re buying in a rising rate environment.” 

Get in touch with the professionals. Think of home buying as a team sport – a mortgage consultant can help you find a good real estate agent, real estate lawyer, home inspector and home insurance agent. Be sure to get in touch with these professionals early in the buying process to avoid last-minute scrambles.

Come up with an offer strategy. In competitive real estate markets, it is common for vendors to put off accepting offers until a particular date. This means buyers may be bidding for a home along with several other parties. It’s easy to get caught up in the emotion, so it is important to decide on a maximum price before bidding and to stick to it.

Choose your mortgage strategy. Ask yourself: Do I want the stability of a fixed-rate mortgage or am I comfortable with the potential rewards and risks of a variable-rate loan? A mortgage expert can help you decide which one makes the most sense for your financial situation, as well as help you understand your payment options and the other features of various types of mortgages.

Get ready to close. When buying a home, it pays to learn about closing costs, which can represent up to 3 per cent of the purchase price, including land transfer tax, lawyer’s fees, appraisal fees, title insurance and home inspection fees.  A mortgage professional can help estimate how much these will cost and offer ideas for how you can cover these costs.

”A lot of first-time buyers can’t wait to get out there and house hunt, but they need to understand that this is not a decision to enter into lightly,” says Brad. “But with careful planning and expert advice, you can make your first home – and your first mortgage – work well for you in the long term.”

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When you signed your mortgage a few years back, you were thrilled with the rate you had negotiated: possibly the lowest in your home-owning memory. That was then.

Who would have believed that mortgage rates would have continued that marvelous downward trend?  Today, mortgage shoppers are looking at some of the lowest rates in history, and many homeowners with existing fixed-term mortgages are experiencing some “rate envy” about today’s rock-bottom mortgage rates. 

It might be worth a conversation with a mortgage professional about your options. Typically, we think of a fixed term mortgage as a non-negotiable contract. It’s true that there are financial penalties to renegotiate, but, many homeowners have been asking mortgage professionals for a mortgage analysis – a detailed look at the penalties versus the payoffs — to determine whether it’s worth refinancing. Like many Canadian homeowners, you may find that refinancing makes sense.

There are two approaches to refinancing: you can simply pay out the penalty on your existing mortgage and start fresh with a new mortgage, or you can opt for what is termed a “blend and extend.”

Firstly, understand that you won’t reap immediate rewards when you refinance; it will take time to see the savings, since you’ll have some up-front penalties. So, if you’re going to be selling your home in the next year, you’re unlikely to benefit from refinancing now. Your mortgage professional can help you assess your “payback” period: the length of time required to see any savings, based on the penalties you will incur and the difference between your existing rate and your new one.

Speaking of penalties, what does it cost to get out of your existing mortgage? Generally, you can expect to pay out the greater of either a) three months’ interest, or b) the interest-rate differential*. The interest rate differential can be high; in effect, your mortgage lender will expect you to pay them the equivalent of what they will lose by releasing you from your mortgage and lending the money at current rates. If it is early in your mortgage arrangement, the penalty may be high.

Don’t be put off by what looks like a big penalty: it’s only one factor in your analysis.

So is it worth it? Only your mortgage professional can tell you for sure, but many homeowners are experiencing significant savings – even with rate differentials of two points (or possibly more).

Begin with a visit to a mortgage professional, who has access to rate information from a wide spectrum of lending institutions – and who can provide you with the kind of detailed analysis you’ll need to assess your options.

In the world of real estate, curb appeal is everything. Whether you’re selling your home, getting ready for some special entertaining or just sprucing things up for spring… you need to make an impact in a flash. The place doesn’t look good from the street, but it’s gorgeous inside? It better be… it takes a lot of work to correct a bad first impression. And a buyer may not take the time to get as far as the front door.

Take some time this month to re-think your home’s’ first impression.

Here are some quick tips to help boost the “wow factor”:

- Take a drive or walk. Then come back down the street towards your home as if you are the one seeing it for the first time. Take a notebook and be objective. Is there clutter in the lawn, driveway, or yard? Maybe the pile of discarded garden pots that you’ve been meaning to recycle? Check out the roof. What about the eaves trough? Anything looking crooked or in need of repair? Any cracked windows or peeling paint? What do you see when you look in the windows? Paraphernalia piled on a window ledge? Tatty curtain liners? Make a note of everything you see.

- A yellow front door. Real estate agents have joked that they can sell any house – if the front door is painted yellow. Or if the home smells like green apples! What does this tell us? Savvy agents know how easy it is to impress buyers with a little “spit & polish” and a dash of flair. Your front door is a focal point – make sure it looks fabulous.

- Sparkling windows. Your windows and doors must not only be in excellent repair, but the glazing must be sparkling clean too. If the exterior of your home is well kept, you’re sending a signal that everything else is well cared for, too.

- A pot of pansies is worth its weight in gold. Make sure you have some lovely pots of flowers flanking the entrance of your home. If you’re making an impression in the winter, it’s worth beautifying your entranceway with two urns of evergreens.

- Impressive house numbers matched to your home’s “look”, a doorknocker, a kick plate, and sturdy doorknobs say to a buyer: welcome to this solid, well-maintained home. Remember that everything must work…especially the doorbell, the door handle, the swinging screen or storm door, the front porch light, the mail box slot…You can’t afford to slip up – at the entrance of your home.

- Wonderful walkways. An attractive front pathway will entice buyers into your home. A few twinkling lights sprinkled here and there creates a magical mood for late-day visitors. Spotlight a lovely tree or trimmed shrubbery for night time curb appeal too.

- Enhance and downplay. Accentuate the positive and eliminate the negative. If you have a pleasing curved pathway, edge it and line it with boxwood shrubbery. If you have an attached garage, paint it (camouflage it with the colour of your exterior), then make your front door “pop” by painting it an impactful colour.

You’ll be pleased by the big impact that just a little effort can make. If you’re selling your home, then it’s in your best financial interest to make sure your home has great curb appeal. And even if you’re not, imagine how wonderful it will be to welcome family and friends to your own front door!