Wednesday

Bank of Canada cuts interest rates

The Bank of Canada today announced that it is lowering its target for the overnight rate by one-quarter of one percentage point to 4 1/4 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 4 1/2 per cent. The Bank is likely to trim rates again in January, although the tone of today’s press release does not hint at a significant easing campaign. The Bank is still officially concerned about upside risks to inflation (given a very low jobless rate), but the credit squeeze and a possible U.S. recession are the dominant concerns now.

The Bank of Canada lowered interest rates yesterday, and took some pressure off the nervous borrowers and hard-pressed exporters and manufacturers feeling the sting of the soaring Canadian dollar. But the central bank also issued a dark forecast, raising concerns about weakening demand in the U.S. economy and continuing turmoil in global financial markets.

Canada's big banks followed suit, lowering their prime lending rate to 6 per cent, and adjusting some of their mortgage and GIC rates. Economists say this could be the first in a series of rate cuts meant to protect Canada's economy.

The Canadian dollar, which reached an all-time high in early November, lost more than one US cent after yesterday's announcement. The currency, known as the loonie, was trading at 98.5 US cents at mid-morning, down from its peak of $1.10.

AIG to Start Mortgage Guarantees in India

American International Group Inc., The New York-based insurer plans to enter mortgage guarantee business in India according to Sunil Mehta, country head and chief executive for AIG in India. India, Asia's third-largest economy, expects to invest about $500 billion building roads, ports and power plants in the next five years to spur economic growth. AIG has 7,500 employees in India and runs eight businesses, including money managing, aircraft leasing, property development and life and general insurance.

UK Mortgage lenders told to prepare for worse

The financial watchdog of UK (The Financial Services Authority or FSA) has issued one of its strongest warnings on the state of the mortgage market and credit conditions, telling lenders to prepare for worse times and secure adequate liquidity, even at high prices. It urged lenders to cut back on granting new loans to build up their financial strength, the FSA also warned them not to race to repossess the homes of customers in difficulties.

It also pointed to potential difficulties for other borrowers next year when 1.4m short-term fixed-rate mortgages will need to be refinanced. The FSA requires firms to treat their customers fairly and have a written approach to dealing with customers in arrears. The FSA acknowledged that lenders would find it difficult to take a sympathetic approach to borrowers in the current environment. It is to inspect the approach of up to a dozen major lenders by the end of March and those which have breached the rules over arrears will face fines, public sanctions and could even be barred from conducting further business.

The FSA's approach contrasts with the US where Hank Paulson, Treasury secretary, is working on a plan that would set more uniform standards for helping troubled mortgage borrowers. The plan is designed in part to address complaints from mortgage lenders and servicers that they do not have the resources to rework mortgages on a case-by-case basis and need to apply a set of uniform standards to large groups of borrowers.

Friday

Mortgage Rate Drops to 6.1%

Mortgage rates fell sharply this week with rates on 30-year mortgages dropping to the lowest level in more than two years. U.S. fixed-rate mortgages fell again according to Freddie Mac's survey released yesterday. 30-year mortgage rates dropped to an average of 6.10 percent this week, their lowest level since the week ended Oct. 13, 2005, when they averaged 6.03 percent. Analysts attributed the decline to increased worries that a severe slump in housing and a continuing credit crunch could drag the economy into a recession. The recent turbulence in stock markets has prompted many investors to rush to the safety of U.S. Treasury securities, driving down the yields on bonds. Fifteen-year mortgage rates declined to their lowest level in more than a year, falling to 5.73 percent from 5.83 percent last week. It was the lowest rate since the week ended Jan. 26, 2006, when the 15-year averaged 5.70 percent. For five-year adjustable-rate mortgages, rates edged down slightly to 5.86 percent, compared with 5.88 percent last week. Rates on one-year adjustable-rate mortgages edged up slightly to 5.43 percent, compared with 5.42 percent last week. The housing market has been suffering through a severe slump following five years of record sales. The weakness is expected to persist well into next year.

Insured Home Mortgage Defaults Reach Higher

Defaults by U.S. home-owners with private mortgage insurance rose last month to the highest since at least August 2001, adding to evidence that the housing slump is getting deeper at the start of its third year. According to data released today by the Mortgage Insurance Companies of America the number of insured borrowers falling more than 60 days behind on their home loans climbed to 59,308 in October, 28 percent more than a year earlier. The median price of new U.S. homes fell 13 percent in October from a year earlier, according to U.S. government data released this month. Treasury department is working with large financial institutions to come up with a plan that will freeze resets on certain subprime loans. Fed Chairman Bernanke indicated in a speech last night that more rate cuts are on the table.

Foreclosure rescue scams

Foreclosure rescue scams are multiplying in the wake of the nationwide sub-prime lending crisis that has caused lenders to repossess hundreds of thousands of homes. Many victims never report these scams, and even when they do, prosecution is difficult, so no concrete statistics exist, but consumer advocates and law enforcement experts say the scams are increasingly common.

Because lenders must file public notices of mortgage defaults, it's easy to find people who are on the brink of losing their homes. Con artists promise the homeowner that a network of investors would save their house from foreclosure by taking over ownership then renting it to them, promising that they could buy it back. Sure, the plan involves deeding the home to someone else. The promised advantages were appealing: cash back from the sale, lower monthly housing costs, assistance in improving the credit score and the chance to make money referring other people for similar lease-back plans. And you can buy back your home after 2-3 years when you can afford it again.

Con artists make money by getting title to the houses and stripping out equity by getting cash back at closing or by refinancing. Even if a house has no equity, if scammers get an artificially high appraisal, they can take out cash from the sale. Often, the victims are told that they can continue living in the home for minimal rent. The cons might make mortgage payments for few months, or they might not make any. Eventually, the house goes into foreclosure, the new deed holder walks away, and the former homeowner is evicted.

If you fear a foreclosure, don't talk to someone who comes to your door and offers a solution too good to be true, or who is advertising the service on little light pole signs in your ares. Always seek professional help. Read what you sign and use your common sense. Don't respond to the "we buy homes" ads. Talk to your Realtor if you need to sell your home. Your mortgage broker can be a good source for mortgage related information.


Saturday

Interest rate cut coming to Canada

Canadian interest rates could be coming down sooner than previously expected, experts said yesterday following Bank of Canada governor David Dodge's suggestion that a change to monetary policy could come next month. Dodge hinted the Bank of Canada may cut interest rates while he was in South Africa for a meeting of the Bank for International Settlements, saying global financial turbulence will be prolonged and poses a risk that central bankers must take into account. He added that the Canadian dollar has moved outside any normal ranges that it had been in, and these are really going to contribute to additional pressures. The Canadian economy, in particular manufacturing, forestry and tourism has been pinched severely in recent months by the dollar's sharp rise. A .25% cut may not be enough to bring the value of Loonie down but it will certainly be a boost for already strong housing market. The bank may have to cut rates even further to see some results in the currency markets. Borrowers will have to wait until at least next month before they start seeing some interest rate relief, but savers are already being nicked by rate cuts, as at least one major Canadian bank on Friday reduced the rates it pays on all of its guaranteed investment savings certificates by as much as one-quarter of a percentage point.

The bank makes its next scheduled announcement on interest rates Dec. 4.

Tuesday

What You Need To Get A Mortgage These Days

Lenders have become more cautious because they can no longer be sure of unloading dicey mortgages on big investors. That means they could get stuck holding them on their books. While all lenders have become more cautious, the biggest turnaround has been in the sub-prime and jumbo mortgage markets. The sub-prime markets lend money to people with less-than-perfect credit while the jumbo market serves people with good credit who want to borrow more than $417,000. If you have good credit and want a smaller mortgage, you should have no problem qualifying. Banks are still willing to make "conforming" loans because they know they can sell them.

Now-a-days Lenders are offering more straightforward deals and requiring their borrowers to meet these updated standards:


Clean Credit

Now lenders are back to what they used to be known for: scrutinizing credit scores. Out of a perfect score of 800, borrowers in the jumbo market must generally have a score of at lest 660, up from 560 since August.

Lower Debt Service Ratios

If your credit card debt, student loans, car loans and would-be mortgage payments come to more than 40%, your application will most likely be a bust.

Prove Your Income and Assets

Be prepared not only for requests for documentation from your employer, but also for records of all savings and investment financial accounts.

More Downpayment

Generally, you can't get away with putting nothing down these days. Figure on at least 5%, and up to 20% depending on your profile."You can also forget about taking out a second loan for the down payment.

Saturday

Mortgage lending reaches new record in UK

Gross mortgage lending in the UK reached a new record in June, due to seasonal effects as well as the cost of higher interest rates, the Council of Mortgage Lenders reported. Although lending in June was up by 9% on May, this was a lower monthly increase for June than in each of the last two years (12% in 2006 and 15% in 2005). The Council for Mortgage Lenders (CML) warned the Bank of England today not to raise interest rates to 6 per cent despite revealing that mortgage lending soared to a record £34.2 billion in June. One of Britain’s biggest financial trade bodies urged the Bank’s rate-setting Monetary Policy Committee to “carefully assess” the impact of the five rate hikes made over the past year before taking any further action. Despite the record level of mortgage lending, there are signs that the market is feeling the cumulative effects of the five interest rate rises we have seen over the past year.

Mortgage rates holding steady

Mortgage rates held onto last week's substantial gains and 30-year fixed-rate loan remained at 6.73 percent for the week ending July 19. One-year adjustable rate mortgages averaged 5.72 percent this week, up from 5.71 percent last week. Last year, 1-year ARMs averaged 5.8 percent. June's housing starts unexpectedly rose to 1.47 million units, construction of one-unit houses still saw a decline of 0.2 percent: At 1.15 million units. The 15-year fixed-rate mortgage averaged 6.38% for the week ending Thursday, down just slightly from last week's 6.39%. The mortgage averaged 6.41% a year ago. To obtain the rates, the fixed-rate mortgages required payment of an average 0.4 point, while the ARMs required payment of an average 0.5 point.

Sunday

How much the rates will rise?

The Bank of Canada made it very clear that it is going to raise rates come July 10. The bond market is already anticipating it. In fact, the bond market is already discounting roughly 50 basis points rate hike by September 2007. We had false alarms in the past where the bond market discounted rate hikes only to be proven wrong, with the 5 and 10 year bond rates rising and falling accordingly. But this time it seems that the bond market has a very good reason to predict a rate hike. The Bank of Canada is concerned about inflation (which at 2.5% ) and the fact that the labor market is still very strong. It is very possible that raising rates now will end up to be a monetary policy error with the Bank of Canada probably overshooting. The Bank of Canada appears to be determined to raise rates, and that’s what counts.

How much will rates rise? Here, we have to realize that there are two important factors that should limit the magnitude of any rate hike. It is far from clear that the slump in the US housing market is over. If indeed the housing market continues to slide and the US economy surprises on the downside, then the Canadian economy will feel some of the pain. This also means that the Fed might cut rates by the end of the year, which will make it very difficult for the Bank of Canada to raise rates in an environment of falling US rates. Such a situation will boost the Canadian dollar significantly, with all the negative implications.

It is very important to understand the impact of a stronger dollar on monetary policy. Type A is the good type, in which the dollar rises due to higher commodity prices. The Bank of Canada is not concerned about such appreciation since any damage to the manufacturing sector is being offset by a gain in the commodity sector. Type B appreciation (b for bad) is the one that reflects mainly expectations that Canadian interest rates will rise by more than US rates. In this situation, there is only damage with no positive offset. Clearly, the recent appreciation in the dollar was Type B, something that the Bank of Canada will have to take into account. Another factor to consider is that most of the inflation in Canada is coming from the west. By raising rates too much, the Bank is risking taking Ontario and eastern provinces into a recession.

So, the bottom line is that the Bank will raise rates, but probably not too much. Fifty basis points rate hikes by September is a reasonable guess. This means that the main damage from this point will be in the prime rate, and less in the five year rate. From a practical perspective the mortgage interest rate curve is relatively flat and will remain that way for a while. This means that taking a variable rate mortgage vs. fixed term mortgage will not result in any material savings. And given that there is the risk that the US economy will surprise on the upside, then a risk averse borrower will be probably better off locking now in the current rates.

Variable vs Fixed

Just like always, variable rate mortgages are offering bigger bang for your buck in Canada. Prime rate remains 6% and at 5.1% (prime -.90%) variable rate mortgage is the best interest rate available in the market for a mortgage that has a term of five years. The best rate available on a five year closed fixed rate mortgage varies from 5.45% to 5.65%. While adjustable rates have remained the same for over a year, fixed mortgage rates have consistently risen. Before April 2nd, 2007, the fixed rate was lower than the adjustable at 4.99%.

Thursday

Your credit score

Believe it or not, your monthly bills are the ticket to your financial well-being. The way you handle those bills can make a difference that you can measure on the bottom line of your family finances.
A good credit score (the higher, the better) is rewarded with good loan rates and access to money when you need it. A low credit score can cost you extra – even on your mortgage, where the debt is secured against your home. And you may be refused credit just when you need it most.
You may want to check your own credit score once a year – to ensure that all the information in your file is accurate. You have a right to access your own credit records through a service like Equifax or Trans Union. There may be charges for mailing or internet downloading of your files, but it can pay to know your own credit score.
It’s helpful to understand what’s behind that credit score: what impacts your score and what lenders are looking for when they check your credit.
When those bills come in, do you pay them on time? Your payment history is a significant factor in your credit score. If you have paid bills late, had an account that has gone to collections, or declared bankruptcy, then your credit score will drop accordingly.
How much money do you owe? Lenders will look for a nice comfortable buffer between your debt and your credit limits. If your credit card or your line of credit are always teetering at the top of their limits, that is likely to have a negative effect on your credit score.
How long is your credit history? Lenders will be interested to know how long you’ve been a borrower. If you have a long credit history with a good payment record, you will score high in this component. A short credit history makes it difficult for lenders to assess your risk – though if you pay your bills in a timely way and maintain low credit balances, these good habits can offset a short history.
Have you applied for new credit lately? A lender will be able to see if there have been other “inquiries” on your credit report. If you have requested new credit several times in a recent period, your score may be affected. Don’t worry about routine checks or inquiries from your existing creditors. Those inquiries should not impact your score.
How much credit do you have and what types of credit do you use? Both too much and too little credit can lower your credit score. Lenders will be looking for a record of established credit accounts with good payment histories. Too many credit cards, or accounts with high-interest finance companies can affect your credit score.
So what doesn’t affect your credit score? Personal information such as your race, religion, sex or marital status are neither recorded nor scored in your credit history. And, perhaps surprisingly, your salary, occupation and employment history are also not relevant to your credit history.
Whether or not you intend to take out a mortgage or borrow money, you should check your credit history and ensure that all the information contained there is accurate. You want to know what any future lender can see. Talk to your mortgage broker for more information.

Wednesday

Pre-arrange your mortgage

Fewer people are getting their mortgage pre-approved when buying a home for the first time according to a survey done by Canadian lenders. Survey shows that percentage of first-time home buyers who pre-arranged a mortgage has declined from 73 percent in 2001 to 62 percent today. This trend shows that almost half of first-time home buyers are not doing any planning for their mortgage. Home mortgage should be part of your overall financial plan or you could end up paying thousands of dollars extra to your lender. A pre-arranged mortgage gives you time to negotiate the terms and conditions of the mortgage other than the interest rate, And not to mention the protection against fluctuating interest rate for up to 120 days. Getting a mortgage pre-arranged doest not cost you anything. Talk to your mortgage broker to pre-qualify and shop for a home with confidence.

Tuesday

Indian mortgages get expensive

ICICI Bank Ltd., raised the benchmark interest rate on all floating-rate loans, including mortgages, by 1 percentage point to 12.75 percent, thanks to the Indian central bank's monetary policy. This move came on top of a similar increase in February, and a half-percentage-point one in December. Central bank is punishing homeowners with higher interest rates and the government is rewarding them with big tax exemptions. There seems to be no clear policy on this issue. With the Indian growing at 9% /yr the interest rate relief may not come to India for some time.

UK mortgage demand lower

The number of mortgages approved in March fell by 8 per cent compared to the same month a year ago according to the British Bankers' Association. This is even when the average mortgage taken out this year was 12 per cent higher than in March 2006. Overall, there were 198,000 mortgages approved for all purposes in March, representing £22.3 billion. Net lending rose by £5.1 billion during the month. Economists say that a total interest rate rise of 0.75 percentage points over the past nine months is finally forcing borrowers to change their behaviour. Talk to your mortgage broker for more information before buying a home or condo.

Thursday

Monetary Policy Report - Bank Of canada

The Bank of Canada released its April Monetary Policy Report today. Growth of the Canadian economy has been in line with the Bank's expectations as set out in the January Monetary Policy Report, but inflation has been higher than expected. The Bank now says that the Canadian economy was operating just above its production capacity in the first quarter of this year. Domestic demand continues to be the main driver of growth in Canada. Core inflation is likely to remain slightly above 2 per cent in the coming months, because of pressures on capacity and the impact of higher core food prices. Inflation is expected to moderate by the end of 2007. The Bank continues to believe that the risks to its inflation projection are roughly balanced, although there is now a slight tilt to the upside. On Tuesday, the Bank OF Canada left its key policy rate unchanged at 4 1/4 per cent (Prime rate 6%). Mortgage interest rates are expected to remain stable for a while. The next meeting is in May. Talk to your mortgage broker about how interest rates change in the Canadian mortgage market. A little mortgage education can save you some money.

Wednesday

UK Mortgage rates could hit 8% this year

The unexpectedly large rise in inflation means the Bank of England is sure to push through more increase in interest rates in coming months - so variable mortgage rates could top 8%. For anyone that hadn't realised, inflation (the Consumer Price Index) rose to 3.1% this month. Bank of England is under pressure to bring inflation down quickly. As a result, the bank looks increasingly likely to raise interest rates in May. What's more, this may not be the last rise we see, with some economists predicting that the base rate could hit 6% (or higher) come the end of the year. Three Bank of England rate rises have been pushed through since August 2006 taking the base rate from 4.5 per cent to 5.25 per cent and adding around £750 to the annual cost of an average £100,000 variable rate mortgage. The last time mortgage rates nearing these levels was 15 years ago. Talk to your mortgage broker in UK about the options available to you so that you can save some money in the future. Or move to Canada where mortgage rates are still low and not expected to rise soon. Ha ha ha.

Tuesday

High-ratio mortgage threshold changed

Canada is reducing the cost of home buying by raising the threshold for compulsory mortgage insurance. An amendment to the Bank Act allows borrowers to access conventional mortgage financing with a 20% down payment. Previously, home buyers were required to make a down payment of at least 25% or they had to pay mortgage default insurance premiums. Bill C-37 raises the loan-to-value ratio requiring mortgage insurance from the current 75 per cent to 80 per cent. High-ratio mortgage insurance will still be required for mortgages greater than 80 per cent of the home’s value. Homebuyers could save an estimated average of $2,500 in insurance premiums, based on an average home price of $300,000. The new limit also affects individuals who intend to refinance their mortgages. In addition to insurance savings, the change will also make it easier to obtain a larger mortgage than previously possible under similar circumstances for a borrower. For refinancing at 80 per cent, there is an extra five per cent equity available to the borrowers for their financing needs.

Monday

FIRST NATIONAL FINANCIAL OFFERS AIG UNITED GUARANTY PRODUCTS

Reflecting a dynamic, changing mortgage landscape and trying to meet the demands of the growing mortgage industry First National Financial LP announced that it will offer clients mortgage insurance through AIG United Guaranty. First National Financial is the country’s largest non-bank originator and underwriter of residential mortgages. The combination of Canada’s largest non-bank mortgage originator with a member company of one of the world’s largest insurers will certainly mean more mortgage choices for Canadians. AIG United Guaranty is expected to sign up with other major lenders as well. More choices in the mortgage insurance field will certainly be good for consumers in the coming years as AIG United Guaranty tries expand its market share in the industry. Mortgage default insurance industry in Canada is currently dominated by 2 major players, CMHC (Canada Mortgage And Housing Corporation) and Genworth. Ask your mortgage broker about the mortgage default insurance options available to you when buying a new home or refinancing your existing mortgage.

ING - UNMORTGAGE

Unmortgage is just another mortgage product offered by ING Direct. They have confused many people with this new "brand name". It's not not a reverse mortgage, its not a mortgage out of this world, it is just another mortgage product. It does have some good features attached to it. ING DIRECT UNMORTGAGE offers many payment frequencies, which include monthly, bi-weekly and accelerated bi-weekly. Many other banks offer the same type of options. In fact, many lenders also offer the option of weekly payments. Unmortgage also offers flexible terms (1-10yrs), amortization periods and prepayment options just like any other lender. ING also advertises best rates and terms, but I don't think they can beat all lenders out there all the time. If you are looking for a mortgage that offers the best interest rate at good terms, I recommend that you talk to your mortgage broker. The Mortgage Group in Vancouver has access to many lenders and mortgage products including ING's UNMORTGAGE.

Saturday

Canadians making bad mortgage choices?

RBC (Royal Bank) released it annual homebuyers survey few days ago. According to the survey many Canadians seem confused about the mortgage choices available to them, especially when they have to choose between a fixed rate mortgage and a variable rate mortgage. RBC's survey shows that most people will stick to the fixed rate mortgage products even when a "safe" variable rate mortgage is available that will save money. Majority of people find it difficult to choose between a fixed rate and a variable rate mortgage. The top reason for opting for a fixed rate mortgage is the preference for payments that don't change every month. Some 76% respondents believe that their mortgage payments will change each time the prime rate changes, even though its not true. Variable rate does not necessarily mean a variable payment each month. A mortgage broker can be a great help when it comes to understanding you mortgage needs. Ask your mortgage broker about the benefits of variable rate mortgage products.

Why use a Mortgage Broker?

Most of think that mortgage brokers are only for people who have bad credit or were turned down by a bank. Unfortunately, anyone with this kind of outdated thinking could be losing thousands of dollars! New home buyers and all homeowners can save time and money by using the services of a mortgage broker. A mortgage broker has access to many competing lenders, including banks, pension funds, trust companies and even private individuals. While you may arrange a mortgage every five years, mortgage brokers are completing thousands of mortgages each year. This enables them to negotiate better interest rates, which can be passed on to their clients. There are other potential cost savings. On any given day, a particular lender may have a special rate offer for a specific mortgage term.

Many home buyers take the quote from their bank and choose a term and rate offered by the lender without realizing that a mortgage broker may be able to save them up to one percentage point off the posted rate. To ensure you get the best rate, it’s best to contact a mortgage broker at least three or four months before you renew your mortgage or consider a new home purchase. Mortgage brokers can usually guarantee an interest rate for 90-120 days. If rates go up you'll get the guarenteed rate, should rates drop in the meantime, you would get the lower rate. You also need to consider that when you shop from lender to lender, there is an accumulation of inquires on your credit bureau report, affecting your credit rating. 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.

What About Fees?

Some people think that using a broker will cost them lots of money. Mortgage brokers usually don't charge any fee because the lender that provides the mortgage pays the mortgage broker a fee for seding a client to the mortgage lender. A fee may still be charged to clients with impaired credit, or when private money is used. Mortgage brokers usually charge a fee to arrange a commercial mortgage. A mortgage broker can potentially save you lots of money. I suggest that you talk to a professional mortgage broker before getting any kind of mortgage. Most of them don't charge any consultation fee, so you got nothing to loose.

Friday

Bank of Montreal Stops Using Mortgage Brokers

Canada's fourth largest lender by assets,Bank of Montreal, has stopped using outside mortgage brokers and will instead expand its own network of mortgage salespeople. Bank of Montreal (BMO)has been losing market share in the home lending business after it stopped discounting mortgages to compete with rivals last year. The Toronto-based bank made the decision on brokers last month, saying it wasn't as lucrative as selling mortgages through the bank. The bank is also no longer buying third-party mortgages. Bank of Montreal may take a hit in market share from the change. BMO may launch new mortgage products to compete with mortgage brokers, who are increasing market share every year. For more information on mortgages and related products, talk to your mortgage broker. Mortgage brokers have access to a wide range of products.

Check out Abbotsford real estate financing options at Abbotsford Real Estate site or contact the Abbotsford realtor.

Mortgage Basics

There are many stresses associated with home buying – both financial and emotional. And frankly speaking, it doesn’t help that the process comes with its very own foreign language. While your mortgage broker can help de-mystify these terms, it helps to have a bit of a primer on what some of these terms mean. After all, it’s your money and your home we’re talking about; as a Mortgagor, you have a right to understand what you’re reading. (You didn’t know you were a mortgagor? Read on…)

We’ll start with “Amortization” and “Term”. Both refer to periods of time in the life of your mortgage, and you’ll want to be sure that you understand the difference.

The “amortization” of your mortgage is the length of time that would be required to reduce your mortgage debt to zero, based on regular payments at a specified interest rate. The amortization period is typically 15, 20 or even 25 years, although it can be any number of years or part-years. You could establish that you are able to make a certain payment each month of say $950 for your $130,000 mortgage at 5.5%. In this case, your amortization period will be just under 18 years. Or you could tell your broker that you’d like to be mortgage-free in just 10 years. With an amortization period of 10 years at the same interest rate, your $130,000 mortgage will cost you about $1,407 per month. That’s a tougher monthly payment, but you would save thousands of dollars in interest. (More than $35,000, in fact.) As you arrange your mortgage, then, keep in mind that your amortization period may be fairly long -- although the shorter you can make it, the less you’ll wind up paying for your home in the long term.

The “term” of your mortgage will typically be shorter. The “term” is the duration of your mortgage agreement, at your agreed interest rate. This will be a very specific length of time, although you will have several choices. A 6-month mortgage is a very short-term mortgage. A 10-year mortgage will be one of the longest terms, generally with a higher rate of interest to represent the higher degree of uncertainty in the economic outlook. After your mortgage term expires, you will need to either pay off the balance of the mortgage principal, or negotiate a new mortgage at whatever rates are available at that time.

Now, back to the term “Mortgagor”. This is one of three very similar terms: “Mortgagee”, “Mortgagor”, and “Mortgage”. A Mortgagee is the lender of the money: a bank, company, or individual. A Mortgagor is the borrower: the person or persons (or company) that is borrowing the money, and who will pay it back to the mortgagee. The Mortgage, of course, is the legal document that pledges the property as a security for the debt.

Still confused? Speak with a mortgage professional. Get the best mortgage suited to your needs and all your questions answered in plain talk.

Check out "The Condo Seller" for financing a condo in Abbotsford BC

Thursday

UK mortgage sales higher, rates may rise.

Strong retail sales and an unexpectedly big rise in British mortgage lending suggest three interest rate hikes since August have failed to curb consumer spending. Another rate hike may be coming due to this new development. The Bank of England said mortgage lending rose more than 10 billion pounds ($20.1 billion) in February versus forecasts of 9.4 billion. Mortgage approvals held steady at 119,000 when analysts had expected a fall. A survey by the Confederation of British Industry showed retail sales volumes rose at their fastest pace in more than two years this month, twice as fast as expected. The strong lending performance was echoed elsewhere, with the number of approvals, often seen as a good indicator of future demand in the property sector, holding up pretty well during the month. The number of approvals was unchanged at 119,000, just ahead of market expectations.The housing market is a key factor in BoE rate decisions. Rate setters are hoping that the three interest rate increases since last August, which have taken the key repo rate up to 5.25 pct, will rein in consumption and inflationary pressures stemming from a buoyant housing market. Financial markets are fully pricing in another quarter point increase to 5.50 percent.

Can't make that mortgage payment?

More than 2.1 million Americans with home loans missed at least one payment last year, according to the Mortgage Bankers Association. The rate of new foreclosures hit a record. The problem is likely to get worse, as variable rate mortgages adjust to higher rates, many borrowers are finding they can't afford their payments. And the collapse of the subprime mortgage market has made it even harder. But be aware, If you are unable to carry your mortgage, letting the bank foreclose could lead to a lifetime of hardship. Losing your home is just the beginning. A foreclosure will damage your credit for years, making it impossible or at least extremely expensive to buy another home. If the proceeds from the sale of your home don't cover your mortgage loan, your lender might sue you to recover the unpaid balance. Many borrowers who lose their homes to foreclosure haven't tried to negotiate with their lenders. Lenders are usually willing to work with borrowers to avoid foreclosure. You should call your lender before you miss your first payment. The longer you wait, the fewer options you'll have. Once your loan is declared in default, typically after you've missed three or four payments, you're past the point of no return. At that point, most lenders won't accept a partial payment of what you owe. Unless you can come up with the money to cover all your missed payments, plus any late fees, your lender will start foreclosure. Put your home up for sale. The proceeds from the sale might cover your mortgage balance and selling costs. If you have no equity or your local real estate market is depressed, ask your lender to consider a "short sale.' In a short sale, the lender agrees to accept the proceeds from the sale of your home, even if they don't cover the amount you owe.Ask your lender to accept a deed in lieu of foreclosure. If you can't sell, your lender may agree to take the deed to your home and cancel your debt.

Tuesday

Tax deductible mortgages in Canada

Is you mortgage tax deductible?

If you are like most Canadians the answer is NO. The interest you pay on your home mortgage is not tax deductible in Canada. But if you do some smart planning, the interest paid on a mortgage can become tax deductible, even when the mortgage is on your principal residence. I will be writing about how to make your mortgage tax deductible and how to pay off your mortgage faster than you think is possible. Check back in few days for these mortgage tips.

Mortgage Brokers In Abbotsford BC

Persistent Mortgages is the place to go for mortgages in Abbotsford BC. It is associated with The Mortgage Group of Vancouver. 6 brokers, Dave, Ken, Raj, Aman, Hakam, and Ray are available to help you with all your mortgage needs. The company is owned and managed by Dave McDonald. Dave specialises in commercial mortgages.

Persistent Mortgages can help you get any type of real estate financing. Check out Persistent Mortgages if you are looking for first mortgage, 2'nd mortgage, 3rd mortgage, line of credit, debt consolidation loan, commercial mortgage or business operating loan.

Monday

CMHC - Mortgage Insurance For Self Employed

There is a good news for self employed people looking to get a mortgage in Canada. Canada Mortgage And Housing Corporation (CMHC)is improving its mortgage loan approval system that can help self employed people qualify for a mortgage. New program will be available next month.

"Self-Employed Simplified" will make it easier for certain self-employed borrowers to obtain a mortgage loan insurance and as a result enable them to take advantage of of lower interest rates. Commissioned sales people will also benefit from this program. Program is designed for borrowers who have minimum 2 years of experience in the same type of work and good credit record. This product will be available for 1 or 2 unit owner occupied properties and will also be available for refinance for upto 90% of the homes value.

Talk to your mortgage broker for more info.

Visit myabbotsford.com for Abbotsford real estate information.

RED FROG MORTGAGE

What is "Red Frog" ?$?

Envision Financial (credit union) named one of its mortgage products "Red Frog". Its like a big line of credit on your home. You must have at least 10% equity in your home to qualify for this product. The interest rate on a Red Frog mortgage is same as the prime rate, which is currently 6%. If prime rate changes, your mortgage interest rate will change. The disadvantage is that you are not getting the best rate compared to a five year closed mortgage term which can be as low as 5% (Its todays' best rate), or the 5 year variable rate mortgage wich is Prime rate minus .90% (means 5.10% today). "Red Frog" allows you to consolidate all your loans into one, including your credit card debt, line of credit, and overdraft limit etc. Interest is calculated daily on the balance of the total debt. If you deposit your pay cheque on friday in your Red Frog account you will pay less interest because your outstanding total debt will be lowered for that day. Once you withdraw funds from your acount, your total debt goes up, you will be charged interest on that ammount.

How good is Red Frog?


It depends on your personal situation, your income the size of your mortgage, your other debt amount etc. If you Can use this product wisely you can surely save some money on interest payments. Another advantage is that you save interest instead of earning interest on your savings and paying interest on your mortgage. By saving interest you don't have to pay taxes on saved interest. Talk to your mortgage broker about Red Frog Mortgages or call us at Persistent Mortgages.
Raj_

Wednesday

Canadians want more flexible mortgage options

According to a recent survey conducted by Canada Mortgage and Housing Corporation (CMHC), 40 per cent of Canadian mortgage consumers are willing to make higher mortgage payments if it means they can buy a home sooner with a smaller down payment. Thirty per cent of Canadian mortgage consumers would also take longer to pay off their mortgage if it would improve their cash flow. The CMHC survey also shows that 75 per cent of Canadian mortgage consumers want to pay off their mortgage as quickly as possible, and 50 percent plan to use any extra money to pay down their mortgage principal. Today's mortgage consumers are extremely savvy shoppers who want the best product for their needs and sound advice as to what option is best for their financial situation.

Home sales increased in almost every province January, fuelling continued demand for flexible mortgage options that make buying a home easier for Canadians. Whether shopping for their first mortgage, renewing an existing mortgage or refinancing, Canadians are increasingly exploring their options.Seventy per cent of mortgage consumers are checking competitive rates, getting information from other lenders or shopping for options, and 27 per cent are turning to a mortgage broker for advice on what mortgage is best for them, according to the CMHC survey.

The sub-prime story in the states

The market began another downward march Wednesday on growing fears that the troubles in the subprime mortgage sector are turning into a full-blown financial crisis. The Dow Jones industrial average tumbled more than 100 points shortly after noon Wednesday before rebounding, as investors began to worry that rising delinquencies in the mortgage market–which have sent the stock prices of subprime lenders tumbling–could start to affect the broader economy. All three major stock indexes were knocked down about 2 percent. Subprime lenders provide mortgages to people with poor credit. Though they are a relatively small part of the U.S. economy, their difficulties raise larger concerns about the housing market, which until its slowdown in recent years was a big source of money for consumers.

Subprime loans feature higher interest rates for potential homeowners who don't have enough income to qualify for traditional fixed-rate mortgages. They are usually offered by the 50,000 independent brokers who get a fee for their services, which include attracting people who desperately want to own a home but can't afford a traditional mortgage. In some cases, applicants don't have the money to make a downpayment, so 100 percent of the home's appraised value is financed.

The prospect of bankruptcies in the U.S. mortgage industry prompted investors to buy safer assets like government securities. Lower-than-expected retail sales growth last month also rekindled talk that the Federal Reserve could cut interest rates this year. Lehman Brothers Holdings Inc., the second-biggest U.S. underwriter of mortgage-backed bonds, said risks posed by rising home-loan delinquencies are "well contained"

Canadian mortgage market is still going strong. Very high risk products have limited availability in Canada. Canadain housing market is also going strong especially in the west.

Talk to your mortgage broker about your mortgage oprtions.

Sunday

India in reverse mortgage mode

The Union Budget proposals of 2007-08 included the introduction of 'reverse mortgages' in Indian markets. The mortgage market in India is reasonably large. Its estimated size is around $33-39 billion, which is around 5% of the GDP. In other emerging countries such as China, the mortgage to GDP ratio is around 11% and in a developed country like the US, it is 52%.

So What is a 'reverse mortgage'?


In a regular mortgage, a borrower will get a loan from the lender at a particular interest rate and tenor, mortgaging his new or existing house. The borrower will then repay the loan in the form of equated monthly installments (EMIs), where a portion of the principal and the interest is repaid monthly. Usually, as time progresses, the share of principal in the EMI comes down and the share of interest rises.

In a typical 'reverse mortgage', an existing home owner can generate cash flows (loan) from his house without selling it and continue to stay in it as along as he is alive. The borrower need not bother to repay it, till his death or till he sells the house. There is no question of the credit assessment of the borrower. Reverse mortgages help 'cash poor, house rich' seniors to meet their financial obligations during their golden years, and yet continue to live in their house. This means the individuals, above the age of 62 with a limited income, can now pledge their house to a bank for a loan that they'll receive while still living in the house.

When the person passes away, banks would recover the loan and interest after selling the house and pass on the rest of the amount to an heir or anybody the individual identifies. The loan amount would be fixed after assessing the value of the property and the person's age. For now the loan period at 15 years. In India, most parents would want their children to inherit their houses even if they have to compromise on their freedom. But this may be a boon for many senior citizens who are childless.

Saturday

AIG Enters mortgage default insurance market in Canada

American International Group, Inc. (AIG), is the leading international insurance organization with operations in more than 130 countries and jurisdictions. The mortgage insurance arm of AIG will be called "AIG United Guaranty".

AIG United Guaranty will be competing with CMHC and Genworth for mortgage insurance business. Consumers will benefit from increased competition. Mortgage insurance premium rates may come down in the coming months and we will certainly see better and more flexible mortgage insurance products in the market. AIG United Guaranty will launch 13 product to start with. Check out their website for more info www.aigug.ca. Increased number of mortgage default insurance providers will provide greater home ownership access to a greater number of Canadians. Talk to your mortgage broker about mortgage insurance and options available to you or contact Raj at persistent mortgages, visit www.persistent.ca

Friday

Mortgage rates stable, house prices may rise

Canadians don't expect mortgage rates to rise, but do expect housing prices to go up, says RBC survey. Canadians voicing "buy now rather than later" preference

The possibility of mortgage rates rising in 2007 seems to be of much less concern across Canada, according to RBC's 14th Annual Homeownership Survey. In fact, over half (57 per cent) of Canadians believe mortgage rates will drop or stay the same, compared to 31 per cent last year. The RBC poll also reveals that 49 per cent of Canadians are less apprehensive about interest rate increases, compared to 44 per cent in 2006.

"When we assess the consumer sentiment being expressed in this year's study, a picture emerges of confident Canadians weighing their homebuying options in a very positive light," explained Catherine Adams, RBC's vice-president of Home Equity Financing.

At the same time, while over half of Canadians (59 per cent) believe housing prices will rise in 2007, homebuying intentions are holding steady, with three in ten Canadians (28 per cent) planning to buy a house over the next two years.

As for the value Canadians place on homeownership, the vast majority (90 per cent) think purchasing a home is a good investment, according to RBC's poll. As well, the percentage of Canadians who estimate that the market value of their homes has increased by 50 per cent or more over the past two years, has doubled since last year's survey (11 per cent compared to 6 per cent.)

"It's clear an overwhelming majority of Canadians believe purchasing a home is a good investment. In fact, the average Canadian estimates their home has increased by 22 per cent in the last 2 years," Adams added. "And the 'buy now' message is coming through loud and clear across all age groups - from 25 through to 55 plus."

Of those Canadians planning to buy a house within two years, an increasing number are looking at a shorter purchasing window. Over half (58 per cent) of all Canadians are saying buy now, don't wait for next year.

Forty-four per cent (up from 37 per cent in 2006) are looking at buying within the next 12 to 18 months.

RBC Homeownership Survey 2007 Details

-------------------------------------
Regional differences

Focusing on very likely to buy intentions, BC, Ontario, and the Prairies are holding steady from last year, but the numbers have softened in other regions with Alberta going from 18 per cent to 12 per cent; Atlantic going from 14 per cent to 10 per cent.

Renters and owners

Of Canadians who plan to buy a home within the next 18 to 24 months, 62 per cent are renters and 48 per cent are owners. Within the shorter timeframe of the next 12 months, owners outnumber renters, 27 per cent to 18 per cent.

Housing type preferences

Detached homes continue to be the housing type of choice for most Canadians who are likely to buy a home in the next two years - 72 per cent voiced this preference. Condominiums were preferred by 10 per cent, down from 12 per cent last year. Semidetached homes were cited by 7 per cent, up from 4 per cent in 2006. Townhouses fell to last choice, named by 6 per cent of Canadians planning to buy in the next two years, down from 8 per cent last year.

More Canadians thinking "small" for next home purchase

Desiring a bigger house continues to be the most popular reason for an upcoming move, cited by 48 per cent of Canadian homeowners who are planning to purchase a home in the next two years. However, an increasing number are now saying they'll be looking for a smaller home - 33 per cent compared to 20 per cent in 2006. Eighteen per cent responded that they'll be considering a home about the same size as their present one.

Gently used tops newly built

Of Canadians planning to buy a home in the next two years, more are likely to buy a resale home (77 per cent) than a newly-built home (23 per cent). This compares to 74 per cent who favoured resale in 2006, and 26 per cent who preferred a newly-built home.

Wednesday

Mortgage Insurance

Canadian mortgage insurers are finding new ways to make home ownership affordable for more people. Mortgage insurance industry has come a long way since January 1946 when Canada Mortgage And Housing Corporation was established by the federal government of Canad to address post was housing shortage. In 1995 Genworth (GE company)entered the mortgage insurance market in Canada. Today its a multi-billion dollar marketplace with 2 major players, CMHC and Genworth. Other players may soon enter this segment of the insurance market. CMHC cover even small communities, where property values are not stable and private insurers don't like to go there. Both companies offer mostly similar products, new products are being launched on constant basis to stay competitive.

Products offered:

  • Mortgage insurance for self employed, based on the tax assessment +15%
  • New Canadian (permanent residents) can take advantage of all the regular products at the same premium rates.Interest
  • only mortgages are insured for people who have really strong credit history. At least 10% down payment is needed and first 10 years can be interest only. Mortgage must be paid within 25 years total.
  • 100% loan to value ratio mortgages can now be insured through CMHC or Genworth.
  • Genworth even has a product for people who have experienced a credit setback.
There is wide range of mortgage insurance product available now. If you didn't qualify few months ago because you couldn't get a mortgage insurance, talk to your mortgage broker again. Mortgage brokers can help you find best products for your unique situation. Call Persistent Mortgages for more info.

Tuesday

Bank of Canada holds interest rate steady

The Bank of Canada held its benchmark overnight lending rate steady at 4.25 per cent Tuesday and said the risks to its forecast remain balanced. This announcement surprised no one. Every economist polled by news agencies had predicted the central bank would make no change to its key rate, which hasn't changed since last May 24 when it was increased by 25 basis points.

The target rate for overnight loans between banks remains 4.25 percent, the highest since August 2001 and 1 percentage point less than the U.S. Federal Reserve's target. he bank has held rates steady six times in a row following seven hikes ending in May 2006. "Despite recent volatility in global financial markets, the bank continues to judge that the risks to its inflation projection are roughly balanced," the bank said in a statement accompanying the rate announcement. "The main downside risk continues to be that growth in the U.S. economy could be lower than expected."

Bank of Canada continues to say the Canadian economy is operating at, or just above, its production capacity. The next scheduled Bank of Canada rate policy announcement is set for April 24. The next monetary policy report will follow two days later. Interest rates are widely expected to remain unchanged on the next meeting as well.

Talk to your mortgage broker if you have any questions about your variable rate mortgage.

Monday

Non-Conforming mortgages

What is a non-conforming mortgage product and who is it for?

Non-conforming mortgages are mortgage product where traditional mortgage lending guidelines/rules are not followed by the lenders. Traditional or old fashioned or prime mortgages (as lenders like to call em) are for people who have excellent credit rating, good asset base, stable job or income history and lot of money (25%) for down payment. When you lack one or more items described above, you do not meet the big banks' lending guidelines and you can not qualify for a prime mortgage. Some lenders see a business opportunity in this and as a result more people are able to get a mortgage to buy a home.

There are 2 types of non-conforming mortgages:

1 - Alt-A / Near Prime

Alt-A is an alternative mortgage product for people who

  • Have good credit history
  • Have good down payment (30-35%) / low loan to value ratio
  • Don't have proof of income or job security (mostly because they are self-employed and don't show all the income to the taxman)
Big banks are lending to this type of clients now, because they are able to get insurance from Canada Mortgage And Housing Corporation or Genworth (GE). Usually the interest rate you get is as good a a prime mortgage product. More and more lenders are competing in this segment of the market.

2 - Sub-prime (or B mortgages)

Sub prime mortgage is for people who
  • Have bad credit history
  • Low asset base
  • Not enough savings for down payment/high loan to value ratio
Exceed, Home Trust, Wells Fargo, AGF plus several trust and private mortgage companies compete for this business. Client would generally pay a higher interest rate, anywhere from 6% to 15% in today's market. . Interest rates are based on risk involved in the deal. People with high debt load, new Canadians, single parents, people entering the expensive housing market usually take advantage of sub-prime mortgage products.

talk to your mortgage broker if you were not able to get a mortgage from you bank. mortgage brokers deal with all types of lenders. In most cases a mortgage broker can work out a deal for you.

check out Mortgage And Mortgage regularly for more mortgage information.

Sunday

Mortgage rates coming down? May be...

Global economy performed strongly in 2006 despite slow growth in Canada and the United States of America. Strong performance by European Chinese and Indian economies pushed the global GDP growth higher and fear of inflation remains strong. Central banks are willing to increase interest rates to control inflation.

US economy started to slow in mid 2006. Housing market began a downward trend and it continues today. US housing market is not expected to decline too much and it may recover a little bit in 2007. Economy will grow at slower rate than capacity for the first half of 2007. In last half of 2007 and and in 2008 the economy should grow at higher rate as housing and other market stabilize.

Canadian economy also slowed down in mid 2006.Tight labour market and rising wages are expected to have some influence on the growth rate of Canadian economy. Canadian economy will rebound as US economy begins to grow faster in mid 2007. Rising Canadian dollar helped keep the inflation under control. This trend may change once Canadian currency adjusts lower.

Bank of Canada is not likely to change interest rates this year. Canadian economy is growing at good rate is Bank Of Canada is focused on keeping inflation under control. Bank of Canada may reduce the interest rate by .25% this summer. Don't expect a bigger cut in interest rates. Inflation plays the key role.

If you have a variable rate mortgage, you made a really good decision. Interest rates are not expected to increase for next 18 months. Talk to your mortgage broker about advantages and disadvantages of a variable rate mortgage.

Saturday

Stated Income / Stated Assest Commercial Loans Available

Unlike most bank loans, we have a stated income/stated asset program. That means full document paperwork isn’t required – and you enjoy greater flexibility and faster turnaround times.

* No T1s, T4s or NOAs required
* No income verification
* Unrestricted equity take-out
* Loan amounts up to $1.2 million
* Secured on commercial properties like multifamily, mixed use, warehouse, office, retail, industrial, automotive, rooming houses and more
* Several affordable payment options
* 20, 25, or 30 year terms
* Fully amortized loans
* Prepayment options available

Contact Raj @ Persistent Mortgages in Abbotsford for more information.

Canadians like to pay off mortgage debt fast

CMCH survey says 75% of all respodents to the 2006 mortgage consumer survey conducted by the Canada Mortgage And Housing Corporation indicated that they aim to pay off their mortgage as soon as possible. 50% said that they would pay extra money towards mortgage whenever possible. Canadians, particularly young Canadian are cautious about their mortgage financing. Canadian mortgage survey also says that 84% mortgage consumers are satisfied with the services available in the mortgage industry. Survey also shows that Canadian like to deal with Canadian based lending institutions.
A small percentage of Canadians renew their mortgage with another lender or switch to another lender during the term of their mortgage, but majority of people remain loyal to their mortgage lender.

27% consumeres used the services of a mortgage broker, which is unchanged from previous years. However, when refinancing more people used a mortgage broker compared to past years. 71% Canadian refinanced their mortgage before the set renewal date. Most common reason for refinancing was renovation or improvements to the home.

Low interest rates, and high activity in the real estate sector are expected to keep the trends going into 2007.

Friday

MortgageAndMortgage.Com

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