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!

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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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!

For many people, mortgage payments are their single largest expense. Yet, when financing a home, most Canadians don’t comparison shop to ensure they’re getting the best mortgage rate and terms available. This mistake can cost homeowners tens of thousands of dollars over the course of their mortgage. Here are six ways mortgage professionals can help:

1. ACCESS TO COMPETITIVE RATES.

Brokers deal with multiple competing lenders and can often access exclusive rates. They also have the power to negotiate rate discounts from lenders, which can be passed on to their clients.

2. KNOWLEDGEABLE ADVICE.

Brokers offer consultative service, advice and solutions that are customized to each client’s needs. And unlike banks, brokers work for you.

3. SPEED AND CONVENIENCE.

Brokers will work around a client’s schedule to make the transaction as easy and convenient as possible.

4. PRE-QUALIFICATION.

Whether you’re shopping for a new home or refinancing your existing mortgage, a broker can help you obtain a pre-approved mortgage, often with up to a 120-day interest rate guarantee.

5. PRESERVED CREDIT RATING.

When you shop for a mortgage, there is an accumulation of lender inquiries on your credit bureau report, possibly affecting your credit rating and, ultimately, the rate and terms of your mortgage. This isn’t the case with a mortgage broker, who only does one inquiry yet can still get many competing lenders to quote on your business.

6. PEACE OF MIND.

The Canadian Association of Accredited Mortgage Professionals has a stringent Code of Ethics that members are required to adhere to in order to retain membership.

 •The Big Three: Smoke alarms, fire extinguishers, and carbon monoxide alarms. These three devices are your number one priority. Make sure you have at least one of each on every living level – it is now the law that you must have smoke detectors on each level, and there could be insurance problems if you do not!

•Change the batteries when you change the clocks. This isn’t a battery “check” by the way. Whether or not the batteries are still working, they should be replaced with new batteries. Save the used batteries for a child’s toy or other device. They may have some useful life left, but your own life won’t be dependent on them working for another six months. Replace alarm batteries twice a year — when you change your clocks for daylight savings time or when you are spring cleaning or winterizing. While you’re circling the house with your box of batteries, take the time to check the expiry dates on your extinguishers. Get the kids to help on this semi-annual exercise, and chat about what they should do if they hear the smoke detector.

 •Check detector locations.If you’re tempted to take batteries out of smoke alarms because they activate with regular cooking tasks – or every time you light a fire in the fireplace for guests – then you should consider moving the alarm to a less sensitive position. Keep in mind that fires can begin at the kitchen stove, or at an untended fireplace. Moving the detectors too far away defeats the purpose. Be sensible about your safety.

•Fire routes. Practice exit strategies with your children at least twice a year. Ideally, each room should have two exits; if one is blocked by fire, another is available. Tell your children never to hide in closets or under beds, and not to stop to collect their favourite belongings. And remind them that the safest air is down low – since smoke rises. And the children should know where the family “meeting spot” will be, outside the home. Odds are you will never have to use this knowledge — but it is comforting to know that you are well prepared.

•Clean chimneys. If you have a woodstove or fireplace – you should have it inspected and cleaned every year. Book your appointment on clock-changing day so you won’t forget. Always, of course, burn well-seasoned wood: never green wood or garbage, which can cause dangerous creosote buildups in your chimney.

•Banish mould. Home health includes healthy air. Use fans and a dehumidifier to improve air circulation and quality wherever necessary. Check your equipment during your home safety inspection – ensuring that bathrooms ad kitchens are well ventilated. If you do see or smell mildew anywhere — take immediate action to eradicate it with diluted bleach. (And check your kitchen exhaust system for grease buildups – another potential fire hazard!)

•Slip check. Indoors and outdoors, you want to be able to walk safely. Keep your indoor stairways slip-free and clear; make it a firm rule that no one is allowed to put anything, anytime, on the stairs. Outdoors, keep your pathways and doors well lit. Timers are great for outdoor lights; you save energy, and you’re assured of light when you need it.

This spring, make your home safety inspection a part of spring cleanup day. Your kids will come to expect this little seasonal ritual, they’ll develop good habits and “safety sense”, and your whole family will be better prepared and better protected!

Currently we are able to use 80% of the rent as a direct offset against mortgage payments. After April 19, we will only be able to 50% of the rent and it will be added you your Gross Income….of which the lenders will use up to 44% of that income (O.A.C.). What does this mean??

Example of a refinance:

Client was looking to refinance to lower their payments. They have provable income and would lower their monthly payments by $550 as a result of the refinance.

The lender requires that the TDS (the total of their Mortgage, property tax, & credit debt for all properties) be less than 42% of their Gross Monthly Income.

With the 80% rental offset, their TDS was 39.6% – within guidelines and the mortgage was approved.

After April 19, the lender will use a 50% “add to gross” qualifying method – this put their TDS at 64.1% – this deal would not be approved!!!

To find out if you can take advantage of low rates and easier qualifying critieria, call MBN Mortgage at 403-685-7025 to book an appointment.

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Brad Gavin –

Federal Finance Minister Jim Flaherty announced three new rule changes connected to government-backed insured mortgages Tuesday morning, saying the government is “taking proactive, prudent and cautious steps” to prevent a housing bubble.  

• The biggest change is the requirement that all borrowers be qualified at a five-year fixed mortgage rate even if they choose a shorter-term, lower-interest product.
• The government also lowered the maximum amount Canadians can withdraw in refinancing their mortgages from 95 to 90 per cent
• introduced a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner occupied properties purchased “for speculation.”

The rule changes are set to come into effect on April 19.

What does this mean for you? If you have been on the fence about whether to buy an investment property, now is the time to take action. After April 19, it will require $80,000 to buy a $400,000 rental property instead of $20,000 (O.A.C).

Call or email now to find out if you can take advantage of the current lending environment before it changes.

Bank of Canada keeps rates the same…again