Archive for the ‘Mortgage Information’ Category

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.

What if there was such a thing as a magic card that you could carry with you, which had the power to open doors for you all over the world? You show someone your magic card and ‘voila’, you can have what you wish for. You would want to protect that card very carefully, wouldn’t you? Your credit is a little like that. Your good credit is a passport to financial opportunities. A poor credit rating can be a terrible obstacle… and repairing your credit is often a slow and difficult process.

What you may not know is that you can actually use a mortgage to reestablish your credit. Canadians are carrying heavier loads of personal debt than ever before. For some, the cost of servicing those debts is itself an obstacle to correcting the problem. Each month can be a chase to make the interest payments to keep the debt afloat. But if debts are rolled into a new mortgage, your credit can improve rapidly, assuming of course that you don’t rack up any new debts! 

Here’s how it works:

Perhaps you have maximized your credit cards – and maybe even have a short term loan or line of credit that you are also trying to pay down in addition to your regular mortgage payments. You may be considered a “high risk” borrower under these circumstances, even if you are managing to squeeze out your payments each month. Your overall payment history is satisfactory, but your debt load is heavy. If you consolidate your debts into a new mortgage, you can better manage those debts while also restoring your credit rating.
You may not have considered using a mortgage to refinance and manage your debts, but there are a few significant advantages. Your status as a homeowner can give you access to a lower overall borrowing rate. A house is considered very reliable security, so mortgages often offer the best rates available anywhere. In addition, your credit history enjoys an almost immediate boost, as you begin to make your monthly payments. There are many innovative mortgage options available today, including a mortgage product that has been designed specifically as a credit repair tool.

This specialized mortgage is good news for clients who are trying to distance themselves from their past credit problems. Debt is controlled quickly – since the new mortgage offers an interest rate lower than credit cards that can dramatically reduce the interest charges on your debt – and your credit typically improves in only a few months.

You probably already know that it makes sense to consolidate your debt into one payment. You can generally enjoy substantial savings on interest charges; you have a more manageable monthly payment and better monthly cash flow. Consider how a new mortgage can help you manage your debts – and make it a goal this year to improve your credit rating.

The Calgary Real Estate Board is encouraging homebuyers to take advantage of the city’s dropping house prices, “there is no doubt we are seeing a significant slowdown as Greater Calgary transitions to a more stable and balanced housing market,” said Bonnie Wegerich, the newly appointed president of CREB, “a door may be closing, but the window of opportunity couldn’t be better for buyers right now.”

Not only have house prices stabilized making it increasingly possible for homebuyers to purchase, but with the Bank of Canada dropping its interest rates to an all new low of one percent in January and again dropping it on March 3, it has made it increasingly possible for homebuyers to secure financing.  These “lower interest rates combined with lower house prices, are motivators” for both first-time buyers and seasoned investors and have consequently decreased the average income needed to buy a home in the city by 15% since this time last year.

Not only have variable rates decreased, with prime currently sitting at 2.5%, but we have seen a significant drop in fixed rates as well.  For someone with good credit and borrowing capacity, rates as low as 4.15% on a 5 year fixed term are very possible*.

MBN Mortgage, with its ability to access over 40 of the top lenders and all of their varying products, can provide insight for homebuyers on financing strategies that best suit their specific needs because while rate is important, it is only one of the many vital components to consider when obtaining mortgage financing.

MBN Mortgage
CMP News
*on March 10, 2009
1.866.955.9662

Your Source For Canadian Mortgage Rates and Current Mortgage News

The lure of a stunning gourmet kitchen or sparkling spa-style bathroom may have you chomping at the bit to begin a home renovation but if you heed the advice of experienced renovators, pre-planning and advanced preparation are the secrets to renovation success. Here’s a helpful checklist to get your renovation started on the right track.

Prepare a realistic budget

Determine how much you are prepared to spend on your renovation. Obtain a few quotes from professional renovators to see if your budget is realistic. As you refine your plans, your budget can be fine-tuned. Remember to boost your budget by at least 10 % for unexpected costs.

Decide what you want to do

For most people, this is the fun part – flipping through magazines and watching home decorating shows to get inspired. But it is also one of the most critical phases in any home renovation. Create a folder with photos and examples of what you hope to achieve and include a list of issues you want your renovation to resolve.

Arrange for financing

Get financing in place early to plan your renovation with confidence. Leveraging the equity in your home is often the best option. As a secured loan, you can usually obtain an attractive interest rate and with flexible repayments, this option can be easy on your cash flow. Other alternatives include refinancing your existing mortgage or arranging for a second mortgage on your home. To obtain the best possible terms, be sure to work with an independent mortgage professional who can shop the market for you.

Select the right team

You’ll want to entrust your project to people known for their quality of work. Depending on what your renovation involves, you may need a designer or architect  to come up with an overall design and plan.

Your contractor, who does the construction or subcontracts it to other trades people, will work with you or your designer to implement your plan. Ask for recommendations from friends and family, interview prospective candidates and always check references.

Stick with your plan

With a sound plan, reasonable budget, financing in place and a team that you trust, your renovation can get off on the right track. To keep it there, minimize changes and make yourself available for decisions so that your renovations can proceed on schedule. Remember to keep your eye on the prize- it won’t be long before the dust settles and you can enjoy your amazing new space.

According to the Canada Mortgage and Housing Corporation (CMHC), Canadians spend substantial sums on renovations – they project more than $50 billion will be spent on home improvement projects in 2008. To make sure you get the most for your renovation dollars, follow the lead of experienced renovators and plan ahead for success.

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