Get the Most from Your Financing with a Mortgage Check Up

Have you thought about your mortgage lately? Your financial picture can change significantly over time, and having the right mortgage strategy is an important part of making sure your financial needs and goals are met.

A personalized mortgage check up is an easy, no-obligation way to:

• ensure that your repayment approach suits you, for example with payments structured to maximize mortgage principal reduction,
• ensure any consumer debt you may have (such as credit card balances) is transferred to a lower interest rate,
• ensure you have access to the lowest-cost funds for renovations, education or other major expenditures.

Common reasons for a mortgage check up:

• You are planning to have children
• You want to explore your investment options
• You or your spouse have had a change in employment
• You are looking to start or buy a business
• You would like to renovate your home
• You would like the assurance of fixing your mortgage payments
• You are trying hard to manage your payments
• You can’t remember the last time you assessed your home financing strategy

Thank you to our good friends at Invis for this really great checklist.  Please give us a call and we will provide expert, unbiased advice to first time homebuyers as well as those looking to renew or refinance their mortgage, purchase investment properties, or consolidate debts.   604-736-1855

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For those of you new to home ownership and mortgages,  CMHC provides mortgage loan insurance that enables you to buy a home sooner with a minimum down payment of 5%.

The  CMHC  site has dozens of informative articles and videos aimed at helping you buy, maintain and renovate your home.

Here’s a synopsis of the information and where to find it:

Buying a Home

The information in this section includes a Five Step Home buying Primer as well as information on; Buying Your First Home, Choosing a Neighborhood, Buying Condos and information on Government of Canada Home Ownership Incentives.

CLICK HERE for information on buying a home.

Maintaining a Home

For most Canadians, their home is their most important investment. It’s where your family spends a lot of time, so keeping it healthy, well tended and safe is important. A regular schedule of seasonal maintenance and repairs can help you protect your investment by putting a stop to the most common and costly problems before they occur..

CLICK HERE for information on maintaining your home.

Renovating Your Home

Planning is the key to a successful renovation. To help you plan your renovation project, CMHC has information and easy-to-understand tips that can help you assess your requirements and learn the key questions before you get started.

CLICK HERE for information on how to successfully renovate your home.

Are you buying a home for the first time?  Do you need CMHC backing?  Let us guide you through the whole process … it’s easier when you know how!    Call me now (Justin Blacklock)  and we can get started right away!  604-736-1855

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If you are considering getting a new mortgage with lower interest rates, you WILL get dinged by mortgage penalties.

The amount of the penalty depends on your existing mortgage rate and the current rates.  When fixed rates go down, your penalties to get out of your current fixed rate GO UP!

You need to know how much your penalty will be before you decide to refinance or do an “early switch” with prepayment penalties.

Here is an example of a BASIC Interest Rate Differential (IRD) calculation:  
Based on a $200,000 with 3 years remaining on a 5 year term of 5.70%

There are 3 years remaining, so we will use the current 3 year rate to calculate the differential.

If the lenders current 3 year rate is 4%, there is a difference of 1.7%.

Because there are still 3 years left, the principal is multiplied by 3

$200,000  x  1.7%  x    3     =  $10,200 penalty

**This calculation is an estimate and will change every time mortgage rates change. If the differential increases, the penalty will also increase.

The BIG question is … Will you still save money by refinancing?

Here is how to do the IRD calculation.

Step 1: ________ (A)
What is the current interest rate of your Mortgage expressed as a decimal (for example, 6.75% = .0675).

Step 2: ________ (B)
What is the current interest rate (choose the term closest to your remaining term).

Step 3: ________ (C)
A – B = C, which is the difference between your current interest rate and the interest rate in B above (write C as a decimal).

Step 4: ________ (D)
Amount you want to prepay (if any).

Step 5: ________ (E)
Number of months for the remaining term of your Mortgage.

Step 6: ________ (F)
(C x D x E) ÷ 12 = F, F is your estimated Interest Rate Differential Amount  or  “the penalty amount.”

If you want to find out the best rates available … I can do the calculations for you!  Just give me a call and I’ll help you decide if refinancing at today’s low rates will save you money and if it makes sense for YOU!

Justin Blacklock
604-736-1855.

Your exact closing costs will depend on where you live, how much you are borrowing, how you finance your mortgage and your closing date.  The rules and regulations surrounding the various mortgage fees can be complex, and can vary from lender to lender.

Here are some of the most common closing costs you may encounter:

Lawyer’s fees – these vary across the Province,  we can refer you to a lawyer who offers a competitive “legal package.”

Mortgage appraisal fees –  some lenders require an evaluation of the mortgage lending value of a property.

 Land survey fees  – the legal written and/or mapped description of the location and dimensions of your land, obtained from an accredited land surveyor.

Title insurance – may be purchased in lieu of a land survey in some cases.  Provides protection against several defects such as problems with the property that would have been revealed by an up-to-date land survey.

Land transfer tax – buyers must pay this tax to the provincial government when the property’s title passes from the seller.

High ratio mortgage insurance – this will be needed if you are buying a home for less than 20% down.

Home inspection fee – an objective visual examination of the physical structure and systems of a house.

We can advise you on what fees to expect before you sign your mortgage and save you from some big surprizes once you’ve closed the deal.

I’m going to start my answer by being a bit slippery and saying, “It depends on your circumstances.” And it really does!

For some, just coming up with a minimum down payment is a struggle. Others have small to large savings plans and investment portfolios.
If you have a chunk of money and are trying to decide how much you want to put down, the answer in not automatically … all of it!

You have to consider where your money is now:

• Is it in a Bank account making next to nothing in interest?
• Is it invested in high yield funds or bonds?
• Are you planning on using an RSP and take advantage of the Home Buyer’s Plan?
• Are   you using a gift or an inheritance?

If you have a financial advisor, this is a good time to get them involved in your decision making. They will help you take an overall look at your financial standing now and for the future.  It may make more sense to put down a small down payment and keep your high yield investments.

We can help you submit a mortgage application, which will give you a good idea of where you stand.  You can put as little as 5% down. This will give you an idea of the lowest price property you are looking at.

We will also tell you about all the other expenses associated with purchasing a home. While our services carry NO fees, you will have to pay lawyer’s fees, mortgage insurance and have home owners insurance in place for your move-in day.

Don’t forget to budget for new home expenses such as new furniture, home decorating goodies and potential upgrades. If you are buying a house you may want outdoor furniture, fun tools like lawn mowers and home maintenance goodies.

And finally, don’t forget a contingency savings plan.  Home ownership may present you with a few surprises which will be much less painful if planned for!

Give us a call to chat about your options. We’ll walk you through the mortgage options and help you make a decision on the amount you want to put down.  604-736-1855

A report titled Joe Debtor: The Face of Bankruptcy issued by Hoyes Michalos & Associates, a Kitchener-based bankruptcy trustee, indicates that the Bank of Canada is not issuing false alarms.

The report looked at over 8,000 insolvency filings the firm processed  in 2009 and 2010.

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The report  found that the average Canadian filing for bankruptcy:

• owes $59,800 not counting his mortgage
• is 41-years-old
• married
• male
• has four credit cards
• owes about three-and-a-half times more than the average Canadian

“It now takes more of each Canadian’s take-home pay to service the debt that they have accumulated. If anything interrupts the average person’s income, even for as little as a month or two, they find themselves unable to meet their obligations.”

The report said there is a common misconception that most people filing for bankruptcy are unemployed. The study found that this was not necessarily the case.  Though job loss or reduced income was one of the factors, there were other contributing factors:

• job loss
• reduced income
• poor financial management
• separation and divorce
• medical problems

“Most Canadians in financial difficulty are good, hard-working people, but due to divorce, job loss, health crisis and over-use of credit, are forced into bankruptcy.” They do not follow the typical stereotype of the average bankrupt; in fact, they look like the average Canadian.”

“The current economic climate, combined with easy access to credit has increased the risk of insolvency for the average Canadian. Based on our experience, many Canadians are only one or two paycheques away from serious financial problems.”

How close are YOU to potential bankruptcy? The report states …

“If you want to predict whether you will have financial trouble in the future, ask yourself this question: If I lost my job tomorrow, how long would it take before I could no longer pay my bills?”

Here are the warning signs that YOU may be in trouble:

• Do you avoid opening the mail if it is a bill?
• Do you only make minimum payments on your debts or have you missed a payment because of a short term cash crisis?
• Will you need to borrow money in the event of an emergency like a car repair?
• Are you close to your credit card limits? Are you using one card to pay another?
• Are you unable to qualify for further lending at low interest rates?

If you answered yes to any of these questions you may be at risk.  Start taking action to reduce your debt immediately and talk to a debt counselor who can help advise you as to your best course of action.

Read Joe Debtor: The Face of Bankruptcy for more information.