·   5,250,000:  The number of Canadian home owners with mortgages.

·   29%:  The percentage of Canadian homeowners who got a new mortgage in the last 12 months.

• 86%:  The percentage of people renewing or refinancing that stayed with their existing lender.
• 22%:  The percentage of mortgagors who took equity out of their homes in the past 12 months.  People are spending more because last year it was 17%. 
• $41,000:  The average equity that borrowers took out of their homes this year. That’s up 16% from last year. The most common reason for borrowing this equity?  Debt consolidation.
• $136,000:  The average mortgagor’s equity.  This equity equals 51.7% of their home value on average.
• 50%:  The ratio of new mortgages taken out in the last year with amortizations greater than 25 years.
• 0.40%:  The average interest rate improvement realized by people who refinanced in the past year.
• 1.59%:  The average discount off of bank-posted rates.
• 5.41%:  The average Canadian’s mortgage rate.  Last year it was 5.56%.
• 1.96:  The average number of quotes people get when shopping for a mortgage.
• 0.28%:  The percentage of Canadians who are 90 days or more past due on their mortgage.  That’s up just slightly from last year.
• 10%:  The approximate decline in mortgage approvals that CAAMP foresees in 2009.
• 36%:  The percentage of Canadians who are aware that insured 40-year and 100% loan to value mortgages have disappeared.
• There’s was a large trend towards variable rates.  40% of mortgages were variable in the past year.  In CAAMP’s 2007 report the number was just 21%.  CAAMP says that’s because “consumers may be expecting interest rate reductions.” 

Another interesting statistic is that more and more Canadians are using Mortgage Brokers to arrange their financing needs rather than approaching one of the Big Banks.  Reason being is that Mortgage Brokers have access to a larger variety of products and typically have access to a minimum of 30-40 lenders offering varying terms, conditions, and rates.

Are you in need of a mortgage?  Or updates on the mortgage market and current and future conditions?  Then contact your MBN Mortgage Specialist today at www.mbnmortgage.com or 1.866.955.9662.

MBN Mortgage

Your Source for Canadian Mortgage Rates and Current Mortgage News

Firstly, when you come across the “Do Not Pay For One Full Year Event” – it IS too good to be true.  Most consumers think that they will save over the upcoming year and pay off that couch or mattress in one lump sum.  However, statistics show that the majority of consumers do not change their spending habits and consequently, are unable to make that one lump sum payment on the final due date, one year later.

What does this mean? 

The 28% interest rate that is written in small numbers at the bottom of the contract you signed kicks in, and you begin having to make extraordinarily high monthly payments on that item you purchased.  These payments report on your Credit Bureau and are taken into consideration when applying for credit and factor into your Debt Servicing ability – in one short summation; it decreases the amount of credit you can qualify for.

Also, should you miss a payment or make a late payment, this too reports on your Credit Bureau and negatively affects your credit score, which in turn negatively affects your borrowing ability.

Secondly, for those who believe that maxing out your credit card to earn rewards points is a great idea – think again.  Unless you plan on going home that same day and making a payment onto your credit card for the amount you spent, you are worsening your credit situation. 

How is this possible?

When your credit cards exceed a 70% balance as compared with borrowing allowance, your Credit Score drops.  It is imperative that you maintain a credit card balance under this 70% capacity and absolutely do not exceed your maximum limit.

Thirdly, have you ever had the “Mall Experience”?  The one where you enter the mall around Christmas and are bombarded with individuals advertising “apply for your credit card now and receive a free bonus gift”?  If you are, you’re not alone.  The key here is to say “NO”.  Each time you apply for credit, the financial institution you are applying with pulls your Credit Bureau, and each time an inquiry is made on your Credit Bureau, it affects your beacon score.  Too many credit inquiries means a drop in your Beacon Score, which affects your borrowing capability.  If you want to apply for credit, do so the correct way – contact your MBN Mortgage Specialist and we will guide you through your credit application and provide you with helpful tips when applying.

Lastly, for those of you who believe that you can defer your last mortgage payment of the year to the end of your mortgage term, we are sorry to say, that is a myth.  Financial Institutions do not reward you for spending at Christmas by deferring payments.  Your mortgage payments are due on the same day as normal and processed in the timeframe as per usual.  So, enjoy the Christmas Season and the gift of giving but ensure you do not spend yourself into debt.

Contact your MBN Mortgage Specialist at 1.800.955.9662 for more helpful hints and how to avoid the credit crunch during the holidays.

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If you are interested in exploring this topic further, give us a call and we’ll help you manage your personal and business financial affairs.

Determining Which Tax Tips Apply To You:

Begin by reviewing your income, expenses and potential deductions.  Before you can make any adjustments you will need to look closely at how much you are earning, spending, and saving, and what you can deduct.

Next, review your portfolio; if capital gains are high, consider taking a loss to offset some of the capital gains income. 

You may also want to look at deferring some of your income.  Unless you have reason to believe the next year will bring you a higher income and move you into a higher personal income tax bracket, you may want to defer income until after the first of the year.  If you are self-employed, for example, send the last invoices out late in December so you will more likely receive payment in January.

Ten Tax Tips To Help You Save:

1.       Tax Loss Selling:  If you have taxable capital gains for 2008 in your non-registered account, you may want to sell some of you losing stocks.  Why?  The realized losses will offset your gains, thus reducing your taxable amount.

Capital Losses can be carried back against Capital Gains accrued in the previous 3 years and carried forward indefinitely.  Make sure you do this prior to December 24^th though as it takes approximately three days to sell your trade. 

The last day for settling trades on Canadian stock exchanges is December 24 and for U.S. exchanges it is December 26. Conversely, consider holding off selling any securities with accrued capital gains until after the New Year.

2.       Be Patient When Taking Stock Profits:  If you want to take profits in a stock, wait until the New Year – this way you will have a year of tax deferral.

3.       Charitable Donations:  You have until December 31, to make your charitable donations in order for it to count under the 2008 tax year.  Also, when you file your taxes next year, make sure you file all the donations under one person.

4.       Donate Stock Instead Of Cash To Charities:  It may be a bit late for this now because of processing time, but if you donate stock to a charity instead of cash you’ll get tax bonuses.  The tax regulations now state that stock donated to a charity will not face any capital gains taxes AND the contributor will receive a tax receipt for the amount donated. 

5.      Pay your January 1st Mortgage Payment on or Before December 31st: This allows you to take an additional deduction for interest paid.

6.       Be careful about buying an actively managed mutual fund: The later it gets in the year, the more likely you will pick up the capital gains distributions on a mutual fund you hardly own. Check the distribution schedule and if it’s late in the year, wait before buying the fund.

7.      If you’re self-employed, stock up: This is the time to buy all of the business equipment and supplies you haven’t yet purchased. Make sure to mark and save your receipts.

8.     RESP Contributions:  If you plan to make any Registered Education Savings Plan contributions, do so by December 31. The annual contribution limit is $4,000 per child. Likewise, pay all child-care expenses by year-end. The annual deduction limits are $7,000 for children under age seven and $4,000 for ages 7-16.

9.     RIFs:  If you or your parents are turning age 69 this year, you have until December 31 to convert your RRSP to a RRIF. If you planned to make one last contribution, do it by December 31 rather than the usual March 1 deadline. Your tax bracket may increase, so make sure you talk to a qualified financial professional about how you can structure your retirement finances to preserve wealth and minimize taxes.

10.  RRSP Contributions:  Don’t wait until the March 1 RRSP deadline to review your annual investments. Do this in December so you have time to take advantage of tax-smart investing strategies before the year-end deadline for income tax purposes.

Contact Your MBN Mortgage Specialist and we can help point in you in the right direction to get the correct and best advice on how to save when it comes to tax time.  Reach us at 1.866.955.9662 or www.mbnmortgage.com.

MBN Mortgage

Million Dollar Journey

The National Post called the cut “radical” and many economists had predicted that at most, the Bank of Canada would decrease rates by a ½ percent, however in a surprise, with the ¾ percent decrease the lending rate has been lowered to 1.50%.

TD Canada Trust was the first Bank to lower its Prime Rate in response to the rate change, and have dropped their Prime Rate by ½ a percent, with CIBC following suit shortly thereafter. 

Why they didn’t match the ¾ percent Bank of Canada drop has not yet been explained; however, speculation says that because the margin of profit on variable rates is currently so low, most other banks will follow TD’s ½ percent drop.

What is the Overnight Lending Rate? 

The overnight rate is the interest rate at which major financial institutions borrow and lend one-day, or overnight funds among themselves; the Bank sets a target level for that rate, which is often referred to as the Bank’s Key Interest Rate.

In November 2000, the Bank introduced a system of eight “fixed” dates each year on which it announces whether or not it will change the key rate policy.

Changes in the overnight rate influence other rates, such as those for consumer loans and mortgages, and can also affect the exchange rate of the Canadian Dollar.

So, what does this Lending Rate Cut mean for you as a mortgage holder?

As a variable rate mortgage holder, your Interest Rate is directly affected by the Bank of Canada Lending Rate.  As this rate decreases and lenders react to the decrease by dropping their Prime Rate, the amount of interest you pay on a monthly basis decreases.  As an example, if your rate through TD is Prime Minus 0.50% and TD just cut its Prime from 4.00% to 3.50%, then your Mortgage Interest Rate just dropped to 3.00% (Prime of 3.50% Minus 0.50%).  This is great news for Variable Rate Mortgage Holders.

A common question that we as Mortgage Specialists encounter is: “should I choose a variable rate or a fixed rate mortgage?”

 For more information on whether a fixed or variable rate mortgage is right for you, reference our Frequently Asked Section at 

MBN Mortgage

Bank of Canada

While a mortgage is fundamentally a loan that is secured against real property, there are many variations to the type of mortgage that can be utilized, depending on your specific needs.

Based on your current financial situation, future goals, investment portfolio, and your wants and needs, we can unearth what type of financing you require.  Below is an introduction to the different types of mortgages available to you and once you have read your options it will be easier to understand what type of financing you have, and need.

A conventional mortgage is a loan that does not exceed 80% of the value of the property.  By putting down 20% of the property value,  you avoid Insurance Fees (CMHC, Genworth, and AIG).  If avoiding an insurance premium is important to you, then this may a great option for you.

On the other hand, a high-ratio mortgage exceeds the 80% loan to value mark and enables home buyers to put down a nominal 5% down payment.  If preserving your cash is important, and if leverage is important as an investor, then a high-ratio mortgage may be ideal for you.  While there may be an insurance premium added to your total mortgage amount, it enables those individuals that do not have the funds for a large down payment, to purchase a property.

Extended Amortization Mortgages are another option available to home buyers and provide a unique way of decreasing your monthly mortgage payment amount by extending the length of your mortgage.  For investment buyers this is ideal because it increases your monthly rental cash flow.  Often times buyers who are on a strict monthly budget will utilize this type of mortgage as it enables them to purchase more home for a lower payment.

Open Mortgages allow you the flexibility to repay the mortgage at anytime with no, or little, penalty.   Open mortgages are usually available in a variety of term, beginning at 6 months to 5 years.  For persons who are commission based and know they may receive large sums of money at anytime, this mortgage option may be ideal for you as you can pay off your mortgage at a faster rate by making additional lump sum payments directly toward your principal balance.  An open mortgage is also ideal for someone who may be looking for short term financing because again, it can be paid off at anytime with little or no penalty.

Most Canadians have a closed mortgage as they tend to offer the lower rates and also allow for a pre-payment option of usually up to 20%.   A closed mortgage offers variable or fixed payments and usually ranges from a 1 year to 10 year term.   If you want to pay off your mortgage balance prior to its maturity date then you will incur a penalty and this is determined by the interest rate and term left in your mortgage.

Fixed Term Mortgages offer a homeowner the security of fixed monthly payments as the interest rate is set for the entire term of the mortgage.  Regardless of whether rates move up or down your payment amount will not change.  For some homeowners this is an important budgeting tool.

Variable Rate Mortgages tend to offer lower rates than fixed mortgages do, but your monthly payments will vary depending on the Prime Interest Rate.  The amount being allocated toward your principal will increase or decrease reflective of current interest rates.

Adjustable Rate Mortgages also tend to offer lower rates but your monthly payment amounts typically remain the same and the amount allocated to principal and interest adjusts accordingly.  This tends to offer the best of both worlds; the lower rate with flexibility, combined with the budgeting tool of knowing what your monthly mortgage payment is.

Home Equity Secured Lines of Credit are another great option for homebuyers looking for flexibility.  There is not pre-payment penalty if you wish to pay off your mortgage prior to the end of its term.  It also provides you with the variable rate and they are interest only which means you only make interest payments, and you only make these payments on the dollar amount that has been used on your line of credit.  You do not have to draw funds until you need them and again, only once you use them do you begin to make payments.

Bridge Financing is another type of financing and homebuyers are often not aware that this type of financing exists.  Bridge financing, or interim financing, is utilized for short periods of time (typically 30-60 days maximum) and is used to cover the time gap when two properties, both firm sales, are involved and the closing dates don’t match.; the property being purchased closes prior to the one being sold.

Now that we have informed of your varying mortgage options (please note some types of financing have not been mentioned but feel free to contact us at www.mbnmortgage.com to learn more), are you able to decipher which type of mortgage suits your specific needs?  Have you determined whether the mortgage you are currently in is the ideal solution for you?

We can help you sort through any confusion and work out payment variations depending on the type of mortgage you choose.  Contact MBN Mortgage, your Calgary and Southern Alberta Mortgage Specialists at www.mbnmortgage.com, or by calling us at 1.866.955.9662 for your free one-on-one consultation. 

MBN Mortgage

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

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

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

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

The president of Lawrence Asset Management Inc. made a name for himself running the firm’s flagship hedge fund with stellar returns such as his 75-per-cent gain in 2007.  But the stock market crash has dealt a blow to Lawrence Partners Fund, which suspended redemptions this week after plunging 65 per cent for the first 10 months of this year.

The investment firm “believes it is in the best interests of all shareholders to suspend redemptions for 60 days,” the 32-year-old manager told investors in letter on Monday. “We are reviewing the situation and expect in the upcoming weeks to present to LPF shareholders a number of alternatives.”

Mr. Sood is the latest victim among Canadian hedge funds caught in the market turmoil.  Falling stock markets are forcing many hedge funds to wind down or undergo a makeover.  “Certainly we are going to see more hedge funds suspend redemptions to meet an orderly request of unitholders who want their money,” said fund analyst Peter Loach. “A lot of hedge funds focus on small-cap stocks, and they have been hit the hardest.”

Last month, Toronto-based Epic Capital Management Inc. said it was closing its flagship Epic Limited Partnership hedge fund after assets sank to $200-million from $300-million.

Lawrence Partners Fund’s options could include winding down. They could also include cutting the management fee for investors willing to stay, sources say, or allowing some investors to pull out if they agree to a further loss on their investment in return.

The past two months have been challenging for Mr. Sood, a precocious student who completed high school at age 16. He joined Toronto-based Lawrence & Co. after graduating with a math degree from the University of Waterloo.

This is the firm founded by legendary Bay Street bond trader Jack Lawrence who built the former Burns Fry into a powerful investment dealer. It boasts blue-chip names such as John Crow, former governor of the Bank of Canada, and Paul Volcker, former chairman of the U.S. Federal Reserve Board, on its advisory board.  With his partners at Lawrence & Co., Mr. Sood founded Lawrence Asset Management as a subsidiary in 2001.

His hedge fund, which invests in smaller-capitalization Canadian stocks and has private equity holdings, saw its stellar track record unravel in September when it took a 48-per-cent haircut. The fund, which had about $217-million in assets in late March, lost more money last month.

Mr. Sood could not be reached for comment, but he told investors in his letter that the fund’s poor performance was also affected by the credit crisis. He “was forced to adjust on little notice to more restrictive credit terms in an already problematic market.”

Sources close to Lawrence Partners say the fund’s prime brokers at BMO Nesbitt Burns and CIBC World Markets cut back on their loans, and that forced the fund to sell holdings in takeover targets Fording Canadian Coal Trust and BCE Inc. at a loss.

The fund was also “negatively impacted” by the delay in closing and lowered pricing in the acquisition of PBS Coals – a major holding – by OAO Severstal, Mr. Sood wrote.

So with Hedge Funds drastically plummeting, where should you turn for safer, more secure investments?

The MBN (7-1) Bond Fund offers the security you are looking for, with the return you want.  It is an RSP eligible bond that provides a 7.0% annual fixed rate of return compounding over a 4 year period, which provides an annualized rate of return of 7.7%.  This fund, unlike most other funds, is Hard Asset Backed, meaning it is secured to real estate which is a tangible asset.  Hard Asset value offers an objective measure of value, based largely on supply and demand economics (market forces) and the law of substitution.  All of these factors, when combined, make for an extremely secure investment and create the asset backed investment, rather than stock backed investment, that most Canadian Financial Institutions are comfortable lending on.  Ask yourself this: What do most of the Major Banks lend on: Real Estate or Stocks?   The answer is Hard Asset Backed Mortgages, or Real Estate.

With the MBN Bond Fund the principal is backed by real estate and the interest is covered by a performance bond.  This gives you peace of mind with regards to the security of your investment.

By transferring your registered investments to the MBN Bond Fund there are no tax implications to be had as you are moving your investments from one Registered Fund to another; you are not relying on consumer confidence to increase the value of your stocks; and you are removing the market volatility that has caused the decrease in your investments.

By doing your research and being a knowledgeable investor you can protect your investments; your lifestyle, your children’s college funds, and your retirement income.  Your investments are too important to leave to chance.  Contact your MBN Bond Fund Specialist at 1-877-212-8002 or www.mbnbondfund.com to learn about how you can transfer your Registered Investments and begin earning a fixed 7% rate of return.

In addition to the Bond Fund, MBN offers a financing team with Mortgage Associates specialized in first-time home buyer financing and investment property financing. 

To learn more about your mortgage options please contact your Calgary and Southern Alberta Mortgage Specialists at MBN Mortgage at 1-866-955-9662 or http://www.mbnmortgage.com

MBN Mortgage

Globe And Mail

Nov 11, 2008