Posts Tagged ‘real estate’

                                                                                                                      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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Credit Scoring

The credit score, also referred to as a “FICO score,” is a mathematical formulae created by Fair, Issac and Company.

The credit score is used by most companies to decide if the applicant is a good credit risk or not. Equifax and Trans Union will calculate the numbers from the credit report and generate a number between 300 and 900.

A low score indicates a bad risk. A score of 700 or more puts the applicant in the lenders’ good books.

 How scores are calculated:

How Clients Can Improve Their Credit Score

1. Order a copy of the credit report, review it carefully and correct any significant errors.
2. Pay bills on time.
3. If there is a questionable credit history, they could open a few new accounts and use them responsibly, paying them off on time.
4. Avoid opening accounts without intention of using them. Having five or six of the same credit card type (e.g., Visa), is not favourable.
5. Having a credit card or instalment loan can help boost a credit score, as long as the balance is not too high.
6. Keep balance low in relation to available credit. If the credit limit is $10,000, keeping the balance below $2,500 (or 25 per cent of the limit) will improve the score. Balances of more than $7,500 (or 75 per cent of the limit) will decrease the score. Going over the limit has an even more negative effect.
7. Pay off credit card debt instead of moving it around to lower rate cards. Moving balances to other credit cards (i.e., “balance transfer”) and closing an old account can hurt the score.

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

Math whiz Ravi Sood has ridden the highs and lows of the wild world of hedge funds.

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

There is a new normal in the Canadian Mortgage Market.  The old normal was discounted Prime Rates on variable mortgages, and fixed rates more representative of the bond yield. 

Welcome to the “now” …

Last week, CIBC Senior Economist Benjamin Tal said “it will be a while before we see a variable rate discount again…the new normal will be Prime or Prime minus 0.25%”.  This is our reality.

What are rates going to look like in the future?  It’s a question we as Mortgage Specialists are being asked frequently.  All anyone can provide is an educated guess because the mortgage market is changing daily as is the consumer reaction to this news, and ultimately, the government’s reaction.

Most analysts believe that rates should be decreasing, for the short term, some of their commentary being:

“Mortgage rates are expected to be relatively stable throughout the last quarter of this year, remaining within 25-50 basis points of their current levels. Posted mortgage rates will decrease slightly in the first half of 2009 as the cost of credit to financial institutions eases. Rising bond yields, however, will nudge mortgage rates marginally higher in the latter half of 2009.”  CMHC

“Some further monetary stimulus (i.e. rate cuts) will likely be required to achieve the 2% inflation target over the medium term.” Bank of Canada

“Credit market traders are pricing in a 100% chance of a 1/4% cut and a 53% chance of a 1/2% cut by year-end. “  CEP

Why are rates coming down?  One reason, according to TD economist Pascal Gauthier, is because the U.S. economy may “record its worst performance in decades, retreating by around 3% in Q4, with the Canadian economy mirroring this performance with a 2.5-3.0% decline, the worst since 1991.”  Moreover, the Bank of Canada’s worst enemy, inflation, is currently no longer a clear and present danger to our economy.

What does this mean for you as a home-buyer? 

If you currently have a variable rate mortgage at Prime Minus, then your monthly mortgage payment amounts should have decreased dramatically due to the large lowering of Prime Rate.  You are in great shape.

If you are a in the process of purchasing a home now, variable rates are typically at Prime Plus One, which is on the high side compared with what we have seen in the past 6 months or so.  Depending on your preference, a variable rate mortgage still offers a lower rate than the current fixed rates being offered.

If you’re in the market for a new mortgage, contact your Calgary and Southern Alberta MBN Mortgage Specialist and we can help you examine your options and arrive at a strategy best suited to your needs.  Good advice in markets like these is imperative when making a choice on rate, term, type of mortgage, and amortization.

MBN Mortgage

Mortgage Trends