Ten signs you might need a tune-up

Like your car or your home, your mortgage benefits from a seasonal inspection.  Spring is just around the corner - so it's a great time to make sure your mortgage is in peak form!

Here are ten signs you might need a mortgage tune-up:

1. You are locked in at a higher rate than you could get today - and you want a professional opinion on your options;

2. You're thinking about moving to a new home this year - or considering buying an investment property;

3. You're still carrying way too much post-holiday debt;

4. In fact, you have more than $25,000 owing on high-interest loans or credit cards;

5. You're worried each month about whether your budget will stretch as far as the bills;

6. There's a renovation or home repair project coming up this year - either by choice or necessity;

7. An investment opportunity is available - and you wish you could take advantage;

8. There's a large expense looming - tuition, wedding, new car - and you need to plan ahead;

9. Your income might wobble or take a hit this year - and you want to be prepared just in case; or,

10.  You're planning on retiring in the next five years.
   
If you recognize one of the signs that it's time for a tune-up, give me a call or send an email anytime.  I'm happy to help!


~ Powered by Mortgage Intelligence

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Can You Afford a Home?

If you're in the very beginning stages of home buying, you may be wondering if you can really afford to buy. Sure, mortgage interest rates are pretty much the lowest they've ever been, but what about all the other costs that you will incur as a home owner?

This straightforward presentation from CMHC walks you through the thinking process of figuring out your readiness for buying a place of your own. Take a look, and let me know if you have any questions!

Let's resolve... to clear these holiday bills and start building wealth!

Most Canadians suffer with their highest personal debt load in January, when the “holiday hit” arrives and our credit card statements let us know just how much we spent on the festive season. It’s especially hard if you already had a burgeoning debt load before the holidays.

This year, make the best New Year’s resolution ever: resolve to clear that debt, and start building wealth. With the right plan in place, this year could be the beginning of a strong new financial life. Start now, and every month you could be seeing the difference: a boost to your monthly cash flow, one easy payment, faster debt paydown, and potentially thousands of dollars in interest savings.

We can show you how to use your home equity to consolidate your high-interest debt into a new or existing mortgage. In almost every case, you’re better off rolling large amounts of high-interest debt into a mortgage. Why? Because we are benefiting from mortgage rates that continue to be among the lowest in decades. Just compare mortgage rates with what you’re paying on your credit cards and other debts.

First we’ll do an assessment of your situation. Here’s an example – mortgage, car loan and credit cards total $225,000. Roll that debt into a new $233,000 mortgage, including a fee to break the existing mortgage, and look at the payoff:

Current Situation*

Monthly payments on $175,000 mortgage - $969
Monthly payments on $25,000 car loan - $495
Monthly payments on $25,000 in credit card balances - $655

Current total monthly payments: $2,119

New Situation*

Monthly payments on $233,000 mortgage (debts + early payout penalty on mortgage) - $1,176
Monthly payments on paid off car loan - $0
Monthly payments on paid off credit cards - $0

New total monthly payments: $1,176

That’s $943 less each month! Now decide how to use that $943. If you put $500 into your mortgage payment, you’ll reduce your amortization from 25 years to 15. Or you could invest in RRSPs or RESPs and reap some tax benefits. Or consider putting some funds aside each month into a “December” fund – so you never have the financial pain of that “holiday hit” again!

It’s a new year. Make it the start of a new financial life. We’d love to help you crunch some numbers to see what kind of life you could be living, something to really celebrate about next New Year’s Eve!


~ Powered by Mortgage Intelligence

*4.5% current mortgage, 3.6% new mortgage, 25 year am. Credit cards 19.5% and car loan 7%, both at 5 year am. OAC. Subject to change. For illustration purposes only.

Photo credit: [c] Asif Akbar for stock.xchng

Top Ten for 2012!

Everyone loves to make forecasts for the New Year. With that in mind, we’ve put together a glimpse into the year ahead for Canadian homeowners – so you can plan for some great opportunities!

1. Low rates early in the year! So many financial experts were wrong last year when they predicted we’d see a rise in mortgage rates. But their loss is your gain. We are beginning 2012 once again at historically low mortgage rates.

2. “Green” money available until the end of March. The popular Eco-Energy Retrofit Grant is still available until March 31, 2012. You can access up to $5000 for improvements for energy-saving renovations to your home, but you’ll need to act fast. Before you begin work, you must arrange for an NRCan-licensed energy advisor to perform a residential energy assessment of your home. After the work is complete, a post-retrofit evaluation must be done by March 31, 2012. Full details are available at www.oee.nrcan.gc.ca. To register, go to www.oee.nrcan.gc.ca/register.

3. The wealth train is leaving the station! At some point rates will begin to rise to more normal levels of 5 or 6 per cent, and it’s possible the trend upward might start in 2012. If you are carrying household debt outside your mortgage, you have a great opportunity right now to board the “wealth train”. Roll your high-interest debt into a low-rate mortgage. Start spending sensibly, saving smart, and you’ll be well on your way to slashing your debt and building your wealth. When interest rates begin to rise, debt derails even the best financial plan. Do it now.

4. Never renew with your eyes closed. When your mortgage comes up for renewal your lender sends out a note suggesting you renew at their current offer. Never renew your mortgage with your eyes closed! This is your moment of opportunity to negotiate the best possible deal. Who knows if the same lender is the best choice? If a renewal is in your financial future this year, bring us your renewal notice. There are some great options out there; we’ll help you look around.

5. Check out the re-advanceable mortgage.  This is a terrific mortgage concept for those who want to pay down their mortgage and have flexibility should an unexpected opportunity or expense arise. The re-advanceable mortgage is the perfect solution. If an emergency comes up, an unexpected investment opportunity, or a special renovation project, you can access your equity without a fuss. It may be the “last mortgage you’ll ever need”.

6. Time to build an income buffer? It’s a bit ironic, but it’s always hardest to get money at the very time that you need it. If there is even a chance that your household income could take a hit this year, then talk to us about building a financial buffer using today’s low mortgage rates. Maybe you won’t need it. But if you do, you’ll be grateful you made the arrangements when you did. With the European debt crisis still wreaking economic havoc worldwide, unemployment and income fluctuations are still a risk.

7. Speed up your mortgage pay-down. Before rates rise, take the opportunity to beat down your mortgage principal. Build a plan to take advantage of your lender’s prepayment privileges! Consider changing from monthly payments to weekly or bi-weekly payments, and take some or all of your tax refund and put it against your mortgage principal. Your interest costs will go down with every dollar you’ve reduced on your principal amount.

8. Build a financial cushion. Your high-interest credit card should never be your emergency fund. This year, build a financial cushion: get in the habit of putting a small sum from every paycheque into a special emergency fund. A nice plump emergency fund is smart saving.

9. Staying put? Instead of moving to get the home you want, consider the many benefits of staying put. The right renovation – an addition, a new family room, a fresh kitchen – might be all it takes to turn the house you’re in, into the home of your dreams. It is almost always less expensive to renovate than to relocate – if an upgrade to your lifestyle is what you’re after!

10. Get your annual mortgage checkup. It’s your financial “medical”; early detection of problems can save your financial life! We like to know how your mortgage is working for you – and look for opportunities to make the most of your greatest budgeting asset! Book a mortgage review and make sure your plan incorporates what may be ahead in 2012: it could pay big dividends in the year ahead!

~ Powered by Mortgage Intelligence

Photo credit: [c] Gábor Suhajda for stock.xchng
 

Five Ways to Pay Your Mortgage Off Faster

Looking for tips on paying off your mortgage in the shortest amount of time?  For most of us, paying off our mortgages as quickly as possible is a priority. 

Here are some simple ways to pay down extra principal early on.  This will shorten the life of your mortgage and reduce the amount of interest you'll pay over the years.    

1. Round your payments up – this little extra adds up over time. 

2. Pay a lump sum whenever possible.  Use your tax refund, your annual bonus, or if you're lucky enough to get one, an unexpected cash gift, and put the money against your mortgage.  Most lenders allow you to pay up to 15% - 20% of your mortgage amount each calendar year. 

3. Increase payments when you get a raise.  Most lenders will allow you to increase your payments, and again, you are typically entitled to increase them by 15 - 20% per year.  Take advantage of their flexibility!

4. Make bi-weekly payments – you'll end up paying more toward the principal each year.  If you start doing this from the beginning, you can pay your mortgage off years sooner.  Not only that, but if you are paid bi-weekly, it makes your life simpler too!

5. Keep payments the same when mortgage rates have fallen.  This is applicable both in a variable rate scenario and when your mortgage is up for renewal and the interest rate has dropped.  Keeping your mortgage payments the same as before can save you thousands of dollars in interest. 

For inspiration, check out this article on Moneyville.ca - in which the author describes how he and his wife paid off their mortgage in three years.  Aggressive?  Definitely.  But, it does show that if you're disciplined and motivated, you can pay off your mortgage earlier than you think.

If you would like help with your specific mortgage question, don't hesitate to call or email me!

~ Powered by Mortgage Intelligence

Photo credit: [c] Jolka Igolka for stock.xchng
 

Using your RRSP for a Down Payment? Read this!

If you're like many of us, wading through all the rules on RRSPs, the federal Home Buyer Plan, and the like is sure to put you to sleep.  Here's a great article that gives you the scoop on the rules around RRSP withdrawals for your down payment.  And it's in plain English! 

Renewing your mortgage? Read this first!

Think of your mortgage renewal as a valuable opportunity. It's a chance not only to take advantage of today's great rates, but also get a mortgage product that better fits your current needs.

When you receive a renewal notice from your current lender, don't simply sign it without knowing all your options. If you do so, you could be paying a higher rate than you need to, and end up with a mortgage that might not be best suited to your requirements.

Often, by the time your mortgage comes up for renewal, you are most likely in a different financial position than when you first obtained it. As our financial and life circumstances change, so does the mortgage product that is best for our needs and goals. For example, you may wish to access your home's equity to consolidate other debts (especially high interest credit card debt), or perhaps help pay for a renovation or investment property.

So make sure to review your options thoroughly. Feel free to call me to discuss your situation. We can discuss your interest rate options, and help you with a customized mortgage strategy.

At renewal time, take the time to ensure you get the most from your financing. We can speak to any concerns you may have about interest rate trends and advise you on what to do as your mortgage renewal approaches.





- powered by Mortgage Intelligence


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Planning for retirement? Make the most of your biggest asset...

Did you know that Canada's first batch of Baby Boomers is hitting retirement age this year? And, according to Ipsos-Reid, almost a quarter of them worry whether they have enough for retirement. They're not alone. Almost 40% of Canadian adults haven't saved a penny for retirement.


If this is your situation, you may not realize that you might actually be living in your nest egg. If you expect to be mortgage-free by retirement, this opens up several options for your retirement plan. If at all possible, you should explore these options, with the help of a good financial advisor, well before you stop working.


Here are three options to consider:


1. Plan on selling your home and downsizing at retirement.


Selling your home and moving into a smaller home or condo should serve to minimize your living expenses. In addition, you can use the surplus cash from the sale of your home to invest in a nice diversified portfolio of investments that ensures safety and income, as well as some growth. Make sure you talk to a good financial planner and/or investment advisor to get the best mix of investments for your long term needs.


2. Leverage the value of your home by setting up a home equity line of credit.


If your home is, or soon will be, mortgage free, and if you still have a source of income to qualify, setting up a "HELOC" will enable you to access the funds tied up in your home. Although there are some initial setup costs, there is no ongoing cost for having an unused HELOC available to you. And once you have it set up, you can use it when needed, either by writing cheques, doing a transfer to your bank account, or sometimes even using an ATM. If you do carry a balance, the interest rate charged is much less than on an unsecured line of credit, and you only need to pay the interest monthly. So, if you're eventually on a limited income, the payments should not be burdensome. And if you’re able to periodically make extra payments, there is no penalty to pay off part or all of the outstanding balance whenever you choose. Talk to an experienced mortgage advisor to find out if you qualify and for what amount.


3. Arrange a reverse mortgage.


If you don't qualify for a HELOC, and you feel strongly about staying in your home, this is another option to investigate. The way a reverse mortgage works is that you determine a maximum amount that you will borrow - no more than 50% of the value of your home - based on your age. You can then receive the funds in one bulk payment, several payments, or installments, based on your requirements. No monthly payments are required; rather, your interest on the reverse mortgage accumulates over time. The mortgage is paid off when your home is sold or when you and your partner (if applicable) permanently move out of your home. While there are costs associated with the setup of the reverse mortgage, it is quick to arrange and the money received is not taxable (and therefore, does not impact OAS and GIS). As long as you continue paying your property taxes and property insurance, and keep up with any maintenance, you have the security of knowing that you can keep your home as long as you wish. If this is an option you wish to contemplate further, you'll need to get advice not only from a mortgage advisor, but also a good financial planner and legal advisor.


Whether you decide to downsize, set up a home equity line of credit, or arrange a reverse mortgage, make sure you get advice from the experts in considering your options. I can't emphasize enough that the earlier you explore which option is best for your unique situation, the less stress you will experience when it is time to implement your plan.
 
 
 

Thinking of helping your kids to buy a home? Three ways to do it

Abigail Van Buren once said, “If you want children to keep their feet on the ground, put some responsibility on their shoulders.”

This holds true even once they’re grown. What better way to give responsibility to your adult children than by helping them to become homeowners?  Further, once your kids are old enough to go to university or first start working, they likely won’t have the funds to buy their own home, yet many of us feel that it is better to own the home we live in, rather than paying off someone else’s mortgage. So, how can this be accomplished? 

Here are three alternatives. Which is most appropriate for you depends on your financial situation and your lifestyle and retirement goals.

Option 1. Provide cash to your child as a gift, for a down payment on a home.

PROS: Your child can buy a home sooner, and start building up equity, rather than paying rent to someone else. If the amount of the gift is more than 20% of the value of the home they wish to buy, you enable them to obtain a conventional mortgage, avoiding mortgage default insurance fees.

CONS: You will have to provide a letter confirming that the funds are a gift, with no repayment required. The child is free to use the money as they choose.

Option 2. Co-sign on your child’s mortgage.

PROS: The mortgage will be obtained based on your financial circumstances. Your child may not have an established credit rating, high enough salary, or a proven track record of employment, to qualify for a mortgage. If your financial situation allows, you can co-sign or guarantee their mortgage. This may result in a better interest rate, larger mortgage amount, and a more ideal home for your child.

CONS: You will be responsible for paying the mortgage, if your child becomes unable to do so. As well, if you later need to borrow money yourself, the debt may impact your own ability to qualify for funds.

Option 3. Use your own cash, or equity you have available in your own home, to buy a home and have your child pay you rent.

PROS: If you feel your child is not yet ready to own their own home, for example, while going to university, becoming the landlord may make the most sense. Using money you have in the bank, or equity in your own paid-off home, you could invest in a rental property. If you do finance the purchase, your interest on the loan is tax-deductible since this is not your primary residence (and if you choose a home equity line of credit, all you have to pay is the interest).   Best of all, your child and their roommates will pay the rent to you, keeping the money in the family.

CONS: If you finance the purchase, the equity in your own home will be tied up and not available to you for your personal needs. The same holds true of you use your own funds. Also, if your child moves away, you might be stuck holding property in an area that was chosen only because your child was attending school there.

The key benefit in these scenarios: the help you have provided will keep money in the family, instead of paying someone else’s mortgage via rent payments.  Talk to your accountant or financial planner to review your options and ensure they are appropriate for your situation, and then enjoy helping to make your child a homeowner!

Photo credit: [c] Microsoft Clip Art

Mortgage and homebuying tools - free for the taking!

If you do a quick google search you will find that there is an overwhelming amount of information available for new homebuyers.  Save yourself some time and check out one of the best sites out there:  the CMHC website.  It contains literally thousands of articles on everything from homebuying to mortgages to renting and dealing with home ownership issues.  And it's not just in English; translations are available in French and eight other languages.

Check out this first time homebuyer video, then spend some time looking at the homebuyer guides, easy-to-use calculators, and of course, information about CMHC mortgage insurance.

I'm a big believer in getting educated.  Since a home purchase is the biggest financial investment most of us will ever undertake, it is worth knowing about a resource that gives you so much unbiased, high quality information about home buying.

Let me know what you think!

Take the surprise out of closing costs

You've figured out your down payment, started working with a great real estate agent, and have been pre-approved for a mortgage.  You're off to the races, right?

Well, not quite.  You are indeed off to a great start.  However, you also need to understand and be prepared for the costs that you will need to pay when you "close", or finalize, your home purchase.  If you don't have the money to pay these closing costs, your deal will not go through.  Not a good thing!

So how much should you set aside for closing costs?

The exact amount is based on a number of factors related to your specific situation, but we usually recommend that you budget about 1.5% - 3% of your purchase price.   This will cover costs such as the following:

• Reimbursements - repaying the home seller for amounts that they've paid in advance, which are now owed by you.  These are things like property taxes, utilities, and so on.
• Ontario Land Transfer Tax, and Toronto Municipal Land Transfer Tax (if you're purchasing in the city of Toronto).  Click on each of these for the calculation.
• Home inspection fee - this is the amount for the inspector you hired to check out the physical structure of your home prior to buying it.
• Appraisal fee, if applicable - typically about $250 in the GTA; it depends on the uniqueness and complexity of your property.
• HST on your CMHC premium, if applicable.
• Legal fees - speak to your lawyer about their fee schedule.  Typically this is in the range of $1,000 - $1,500.
• Title insurance or property survey - many lenders will accept title insurance instead of needing a full property survey.  Title insurance covers a number of situations that could threaten your ownership of your home.
• Property insurance - this insurance, especially fire, must take effect the moment you are the owner of the home.
• Status certificate fee of $100 - this applies to condos only. 
• Interest adjustment amount - based on the timing of your closing date and your first mortgage payment, there may be interest owing. 

What can you do if you don't have the money?

There are a couple of options for you in this scenario:

1) Wait a little longer to purchase your home, until you have the money saved for closing costs.
2)  Consult with your mortgage broker.  Some lenders offer "cash back" programs where you can get up to 5% of the mortgage amount paid to you on your closing date.  You can then use the funds for closing costs or another purpose.

If you have any questions, please get in touch with me.  I would be happy to help.

Enjoy your house hunting!


Photo credit: Microsoft clip art

Want to be mortgage-free sooner? Pre-pay now!

Signing up for a mortgage may seem like a life-time commitment.  For most of us, it is the biggest debt we'll ever take on.  What many people may not realize is just how big a dent they can put in their mortgage by making pre-payments. 

Making extra payments or larger payments early on can add up to significant interest savings and shorten the life of your mortgage, leaving more money available for RRSPs and other investments, as well as improving your cash flow for changing lifestyle needs. 

Here are some strategies for making prepayments:

Add a bit to your monthly payment

Most of us can find an extra $50 per month by cutting out a restaurant meal.  Add that money to your mortgage and you’re saving a lot in interest down the road.   Most lenders allow you to increase your payment amount by a certain percentage every year.

Make a yearly pre-payment 

Paying an extra one or two thousand on your mortgage once per year on the anniversary date of the mortgage could yield significant savings over the life of the loan.  For many borrowers, the money for such a prepayment comes from a tax return. 

Make a larger prepayment early in the mortgage

Note that lump-sum mortgage prepayments have a much greater impact on the total amount of interest you’ll pay, the earlier they are made.  Check your mortgage contract to see how much you can pay down your principal, and how often you can do so.

If you're paid bi-weekly, sign up for "bi-weekly accelerated" payments 

If you split your monthly payment in half, and pay that amount every two weeks, it's an easy way to sneak in an extra payment every year.  This can save your thousands in interest and allow you to pay off your mortgage years earlier.

Please call me if you have any questions or would like to further discuss your options!

Photo credit: Microsoft Clip Art

Debt Restructuring – It Pays to Have a Plan

Many of us are carrying consumer debt from several sources – credit cards, car loans, personal loans, student loans – and are paying much more in interest costs than we should be. 

An option available to homeowners is paying off higher interest debts with a refinanced mortgage that has a lower interest rate. 

This is worth considering if you are paying a lot of interest for your other debts.  Debt restructuring can help lower your overall monthly payments, giving you financial breathing room rather than living paycheck to paycheck.  

Just as importantly, a well thought-out debt restructuring plan can set you up for success, because at the end of the amortization period, your total debt is zero.  With revolving credit – such as credit cards – you may be paying a lot in interest without ever attacking the principal. 

Let me know if you would like my help in reviewing your financial needs.  I can advise you on how to use the equity in your home to reduce the interest paid on your other debts.  We may be able to arrive at a solution that gives you more control over your interest costs, and leaves you with more money at the end of the month. 

Photo credit: [c] Adrian Van Leen for openphoto.net

10 Tips for First Time Homebuyers

If you're starting to think about buying your first home, there's lots to know.   This article from Moneyville.ca is a great starting point to help get you focused. 




Photo credit: [c] Miroslav Vajdic for openphoto.net

Rates bouncing down - then up - then down - so what should you do?

Should you lock in your mortgage rate or stay variable? 

An insightful article on the Canadian Mortgage Trends site discusses the pitfalls of trying to pin down market factors and interest rate changes over both the short and long-term.   The reality is that while we all wish we had that proverbial "crystal ball", it simply doesn't exist. 

As mortgage brokers, we are constantly being asked to predict the unpredictable.  Forecasts, especially long-term forecasts, should be taken into account, but with one caveat: the farther out the forecast, the less likely it is to be accurate. 

It is important to remember that, in any economic times, YOUR long-term financial goals are the most important factor.  From this, you can structure your mortgage term, and mortgage features, to best position yourself to achieve those goals.

Photo credit: [c] Adrian Van Leen for openphoto.net

Thinking of picking up a little condo in Florida?

With Canadian real estate prices potentially cooling off, quite a few of us are looking south of the border for a vacation or investment property.  Not everyone is aware that there may be U.S. tax issues (income tax, state tax, and /or estate tax) to consider, however.  This Globe and Mail article touches on a few of these at a high level, but if you're serious, talking to a cross-border tax specialist is vital.

Stress Test Your Own Debt

Worried about Canadians' sensitivity to a rise in interest rates?  A great article by the popular Globe and Mail columnist Rob Carrick reviews how you can test your own financial vulnerability, together with some solutions if you're getting into the trouble zone.  One solution Rob missed: if you have equity in your home, and have unsecured debt with high monthly payments, you may be able to significantly ease your cash crunch by consolidating the debt into a mortgage or home equity line of credit.   Then, you can focus on paying down the mortgage with any extra cash.  As Rob Carrick says, "Less debt gives you more immunity to higher interest rates."