Here are two great ways to crunch the mortgage numbers.

1. Use our free  Online Calculators.  We have eight handy calculators designed to help you figure out just about anything related to mortgages.

Mortgage Loan Calculator  : This calculator generates an amortization schedule for your current mortgage.

Morgage Refinance Calculator :  How much interest can you save if you refinance your mortgage?

Mortgage Qualifier Calculator : This calculator steps you through the process of finding out how much you can borrow.

Home Budget Analysis : Entering your income and monthly expenditures to find out where your money is being spent, and how much you have left to save, or purchase a new home.

Bi-weekly Mortgage Calculator:  This calculator shows you the possible savings by using an accelerated bi-weekly mortgage payment.

Mortgage Comparison Calculator: This calculator helps you sort through the monthly payments, fees and other costs associated with getting a new mortgage.

Mortgage Payoff Calculator: How much interest can you save by increasing your mortgage payment?

Rent vs. Buy Calculator: Should you continue to rent, or can you afford to get a new home? This calculator helps you weed through the fees, taxes, and monthly payments to help you make a good financial decision.

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2. Use our Cell Phone App

This app really comes in handy when you are visiting properties with your real estate agent.  You can immediately figure out what your mortgage payments will be.

Download this app directly from your Blackberry or iPhone for quick access to our current rates and mortgage calculator.

Download the app from here: http://www.workingbusinesscard.com/download.php
Enter code: 6425010677 to access.

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Clicking through the TV channels the other night, I was appalled by the number of ads for payday loans. They make is seem easy (it is). They show happy, smiling people and make it seem like a reasonable, temporary option (it isn’t).

Payday loans are easy to get, but they are about the worst decision you could ever make financially.

Here are the reasons why you absolutely NEVER, ever, ever get a payday loan.

1. Beyond High Interest

If you look at the amount they “charge” you, or deduct from one advance payment, it looks small … maybe even reasonable.

There have been instances where  annual interest rates of 8000% have been changed.  No, I didn’t accidentally add a few extra zeros … 8000%!

In BC the amounts that can be charged by loan companies are regulated. However fees can still range from $17 to $31 per $100 borrowed.  $31 per $100 amounts to 754% interest per year!

If you keep on getting advances, you will soon be in a  downward loan cycle that will never end.  It will just keep on getting worse every month.

2. Too Easy to Renew

Once you qualify for the first money advance, it is very easy to renew every week or every month. You can even renew before you have paid back your last loan. If you thought you had problems paying off your credit card bills, this is even worse.

3. Your Credit Score Will Be Negatively Impacted

When it comes to calculating your credit score, the “type” of credit you have tapped into makes a difference. Payday loans have a huge and negative impact on your credit score.

What are your Options?

• Family or Friends?  (pay them back immediately if you want to keep them by your side).
• Ask your employer for a one-time-only advance.
• Personal Bank Loan
• Even tapping into your Credit Card is better than a payday loan.
• Go into overdraft on your bank account can help temporarily. (My account lets me overdraft by $500 if I ever needed to).
• Get your budget under control.
• Take DRASTIC stop spending: measures NOW.

Another option is to consolidate your debt into your mortgage. With the new mortgage rules it has become harder to do this, but it is still possible.  Give us a call to discuss your options.

Once you have consolidated your debt into your mortgage, we will advise you NOT to rack up additional consumer debt. If you continue spending, you will end up in the same place again …  unless you take steps to control your money.

A friend mentioned that we take a look at a TV program called “Till Debt Do Us Part.”

Gail Vaz-Oxlade - Till Debt Do Us Part

The SLICE network program is hosted by financial expert Gail Vaz-Oxlade who uses tough love advice and techniques to help couples get out of debt.

In the programs I’ve watched,  couples are dealing with consumer debt issues ranging from $20,000 to a whopping $100,000.  This does NOT include their mortgages, if they have one.

Over the period of a month, Gail conducts a “reality” session where she shows a couple where their money is going and how much they actually owe.  It is no surprise to me that many of the couples have NO idea how much they owe. They are in total denial about their monthly spending.

In one episode, a couple was spending $8000 MORE each month than they were making.  In many of the episodes the couples are regularly spending thousands of dollars more than they are making … which is the reason they are in debt, and the reason they cried out to Gail for help.

Gail starts her tough love rescues by confiscating all debit and credit cards and by placing the couple on a cash diet.  And diet it is … variable spending (food, clothing, entertainment, transportation) is drastically cut.  Drastically cut! So far I’ve seen cuts of anywhere from a  50% to 90% DECREASE in the monthly variable spending budgets.

The totally amazing thing is, almost all the couples manage to cope with the cuts and some of them even have money left in their cash jars at the end of the month.

The second amazing thing is, the couples develop debt payback plans that get rid of their debts in three years or less.  One couple went from racking up a $60,000 debt to developing a plan to pay it off in less than two years.

The show is well worth watching.  You will be entertained and educated.  The SLICE network regularly runs old and new shows.

The “Till Debt Do Us Part” series has several specialty programs including a series of shows focusing on couples who have huge mortgages and are on the verge of losing their homes.  The most current set of programs focuses on couples about to have a baby, or more babies or couples who can’t afford their kids!

This season, Gail has a new series called “Princess” … if you guessed it is about spoiled women who are totally selfish, indulgent and who are overspending themselves and their families into near bankruptcy, you guessed right!

My advice is to watch a dozen or so of the shows.  If you don’t get the SLICE network you can watch many of the episodes online.

Here’s a link to Till Debt Do Us Part
In addition to the schedule and online episodes you will find some great articles and extra videos on budgeting and debt reduction.

Here’s Gail’s Website >> Gail Vaz-Oxlade
Gail has loads of great advice on her personal website, articles, worksheets,  and links to her books.

http://www.gailvazoxlade.com/

Here’s a market update from our friends at Macdonald Realty; Simon Clayton, Jason Low, Sandra Ens, Jason Feinstadt, and Jenny Stephanson.

September 2011 Market Update

With the problems in the US and Europe and the resulting economic turmoil, it is hard not to think of how these factors influence our housing market. And while it’s true that consumer confidence plays a big role in the overall health of housing, it’s important to remember that Canada continues to look like an economic oasis in a desert of bad financial news.

As you know, the US housing market has been in a severe recession for the past several years. And while there’s been talk of a possible correction in the Canadian housing market, it is unlikely we will experience anything near as painful as our neighbours to the south.

There are 3 main reasons for this.

(1) Government Tax Policies
(2) Loan Qualification Policies
(3) Bank Lending Policies

Government Tax Policies

The US Government has long had a policy of encouraging home-ownership. Government-sponsored entities Fanny Mae and Freddy Mac have been getting most of the headlines recently for agreeing to purchase mortgage loans that encouraged unsound lending. However, the US Government’s tax policy of allowing homeowners to deduct mortgage interest payments may be more significant, as it has encouraged Americans to maximize their debt-loads in order to minimize their tax burdens.

Canada, of course, has no mortgage tax break for homeowners, with interest payment deductions only applying to investment properties.

Loan Qualification Policies

The secondary mortgage market in the US allowed the originators of mortgages to pass on the mortgage notes to investors throughout the world. Because of this, lenders and mortgage brokers were incentivized to originate as many mortgages as possible, with little-to-no regard for risk. These perverse incentives led to ‘liar loans’ – where individuals would simply lie to their mortgage broker about their income or employment knowing that there would be no incentive to conduct a background check – and ‘NINJA loans’ – where mortgage brokers offered mortgages to individuals with No Income, No Job or Assets.

In Canada, the originators of loans (typically the Big Banks) tend to hold on to them. Because of this, the correct incentives are in place to ensure that only individuals who can afford the mortgage receive them.

Bank Lending Policies

Another unintended consequence of the secondary mortgage market in the US has been the creation of extensive Adjustable-Rate Mortgage products with attractive ‘teaser’ rates. These products allowed mortgage-holders to pay an unrealistically low rate for a period of time before ‘resetting’ to a much higher, unaffordable, rate.

In addition to this, loans in the US tend to be ‘non-recourse’ meaning that the only collateral that a lender would have on a mortgage is the house itself. In Canada, mortgages tend to be ‘full-recourse’, with many banks demanding personal guarantees. This difference has resulted in people walking away from their homes in the US at a much higher rate than in Canada.

In the end, the result of all of these policy differences means that Canada is fairly well-insulated from the carnage that is occurring south of the border. Interestingly, our conservative, low-competition banking environment may have saved our housing market from a painful downturn.

September 2011 Market Update

If you would like to learn more, please feel free to contact us by phone or by clicking on one of the links below:

Simon Clayton 604-764-0711

Jason Low 604-790-5276

Sandra Ens 604-263-1911

Jenny Stephanson 604-675-6214

Jason Feinstadt 604-263-1911

MacDonald Realty 604-263-1911

In Part One of Avoiding Your Own Personal Debt Crisis we talked about credit card debt … how to control it and how to get rid of it.

In today’s post we will give you a few resources which will help you manage your budget, cut your costs and help you establish a savings vs spending plan.

In the past few years I have watched as communication costs have gone up and up and up.  For many families this is totally out of control and eats away a big chunk of their income.  Cell phones, computer connections, cable connections, ipads, messaging systems and more. They all add up rapidly.

I have a friend who recently cut the costs of phone, cable and Internet connections to 1/4 of what she had previously been paying.  She said she did it without sacrificing anything!

Women’s Day Online Magazine has an excellent article with a dozen actionable steps on Cutting the Cost of Staying Connected. 

Groceries are a major expense for many families.  The Women’s Day article, 4 Ways to Lower Your Grocery Bill, has some great tips.

Pay attention to the tip about shopping on Amazon.  A friend of mine regularly purchases grocery items on Amazon and has them shipped to a Point Roberts mailbox.  Bringing groceries across the border is duty free.  She says she regularly saves up to 75% on the items she buys online  (including the shipping fees, if any).

Car and Transportation costs have escalated dramatically.  OpenTravelInfo’s  How to Save Money on Gas – 29 Tips provides some solid tips on ways to save money.   TreeHugger’s article  66 Ways To Save Money on Gasoline is an eyeopener.  You can implement a half dozen of the tips immediately and you will see the results within the first month.

In the months to come we will have more “Save Your Money” strategies for you.

If you are implementing the tips and ideas to:

• pay off your debts and improve your credit rating so you can qualify for a mortgage
• save for a down payment
• pay off your mortgage earlier

… give me a call.  I can offer you some advice and insight, and help you achieve your goals faster.

Justin Blacklock
604-736-1855

I wrote this article for the Averbach Monthly Newsletter, but since not everyone who visits the site has subscribed I thought I’d also post the article in the blog.

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.